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<SEC-DOCUMENT>0000950152-09-002523.txt : 20090312
<SEC-HEADER>0000950152-09-002523.hdr.sgml : 20090312
<ACCEPTANCE-DATETIME>20090312114702
ACCESSION NUMBER:		0000950152-09-002523
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		13
CONFORMED PERIOD OF REPORT:	20081231
FILED AS OF DATE:		20090312
DATE AS OF CHANGE:		20090312

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MERCANTILE BANK CORP
		CENTRAL INDEX KEY:			0001042729
		STANDARD INDUSTRIAL CLASSIFICATION:	STATE COMMERCIAL BANKS [6022]
		IRS NUMBER:				383360865
		STATE OF INCORPORATION:			MI
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-26719
		FILM NUMBER:		09674680

	BUSINESS ADDRESS:	
		STREET 1:		310 LEONARD STREET NW
		CITY:			GRAND RAPIDS
		STATE:			MI
		ZIP:			49504
		BUSINESS PHONE:		616 406-3000

	MAIL ADDRESS:	
		STREET 1:		310 LEONARD STREET NW
		CITY:			GRAND RAPIDS
		STATE:			MI
		ZIP:			49504
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>k47547e10vk.htm
<DESCRIPTION>FORM 10-K
<TEXT>
<HTML>
<HEAD>
<TITLE>FORM 10-K</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>






<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 10-K</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="LEFT" style="font-size: 10pt; margin-top: 12pt; MARGIN-LEFT: 12%"><B>For the fiscal year ended December&nbsp;31, 2008</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>or</B></DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="LEFT" style="font-size: 10pt; margin-top: 12pt; MARGIN-LEFT: 12%"><B>For the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Commission file number <U>000-26719</U></B></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>MERCANTILE BANK CORPORATION</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></DIV>


<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Michigan</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>38-3360865</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or other jurisdiction of incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer Identification No.)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>310 Leonard Street NW, Grand Rapids, Michigan</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>49504</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(Address of principal executive offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>(616)&nbsp;406-3000</B></DIV>

<DIV align="center" style="font-size: 10pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></DIV>


<DIV align="center" style="font-size: 10pt">(Registrant&#146;s telephone number, including area code)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered pursuant to Section&nbsp;12(b) of the Act:</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" STYLE="FONT-SIZE: 8PT">
    <TD align="center" valign="top">Title of each class<BR>
<U>Common Stock</U>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Name of each exchange on which registered<BR>
<U>The Nasdaq Stock Market LLC</U></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered pursuant to Section&nbsp;12(g) of the Act: None</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.&nbsp;Yes&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;No&nbsp;<FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act.&nbsp;Yes&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;No&nbsp;<FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed
by Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or
for such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days.&nbsp;Yes&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;No&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark if disclosure of delinquent filers pursuant to Item&nbsp;405 of Regulation
S-K is not contained herein, and will not be contained, to the best of the registrant&#146;s knowledge,
in definitive proxy or information statements incorporated by reference in Part&nbsp;III of this Form
10-K or any amendment to this Form 10-K.&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of &#147;large accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller reporting company&#148; in Rule 12b-2 of the Exchange Act. (Check one):</DIV>

<TABLE width="100%" style="font-size: 10pt; margin-top: 0pt"><TR><TD>Large accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT></TD><TD align="center">Accelerated filer&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;</TD><TD align="center"><BR>Non-accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT><BR>(Do not check if a smaller reporting company)</TD><TD align="right">Smaller reporting company&nbsp;<FONT face="Wingdings">&#111;</FONT></TD></TR></TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of
the Act).&nbsp;Yes&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;No&nbsp;<FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate value of the common equity held by non-affiliates (persons other than directors
and executive officers) of the registrant, computed by reference to the closing price of the common
stock as of the last business day of the registrant&#146;s most recently completed second fiscal
quarter, was approximately $56.2&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of February&nbsp;2, 2009, there were issued and outstanding 8,592,730 shares of the registrant&#146;s
common stock.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>DOCUMENTS INCORPORATED BY REFERENCE</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portions of the proxy statement for the 2009 annual meeting of shareholders (Portions of Part&nbsp;III).
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>







<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">








<!-- TOC -->
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<!-- link1 "PART I" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I</B>
</DIV>

<!-- link2 "Item&nbsp;1. Business." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1. Business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The Company</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mercantile Bank Corporation is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the &#147;Bank Holding Company Act&#148;). Unless the text clearly suggests
otherwise, references to &#147;us,&#148; &#147;we,&#148; &#147;our,&#148; or &#147;the company&#148; include Mercantile Bank Corporation
and its wholly-owned subsidiaries. As a bank holding company, we are subject to regulation by the
Board of Governors of the Federal Reserve System (the &#147;Federal Reserve Board&#148;). We were organized
on July&nbsp;15, 1997, under the laws of the State of Michigan, primarily for the purpose of holding all
of the stock of Mercantile Bank of Michigan (&#147;our bank&#148;), and of such other subsidiaries as we may
acquire or establish. Our bank commenced business on December&nbsp;15, 1997.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mercantile Bank Mortgage Company initiated business in October&nbsp;2000 as a subsidiary of our
bank, and was reorganized as Mercantile Bank Mortgage Company, LLC (&#147;our mortgage company&#148;), on
January&nbsp;1, 2004. Mercantile Insurance Center, Inc. (&#147;our insurance company&#148;), a subsidiary of our
bank, commenced operations during 2002 to offer insurance products. Mercantile Bank Real Estate
Co., L.L.C., (&#147;our real estate company&#148;), a subsidiary of our bank, was organized on July&nbsp;21, 2003,
principally to develop, construct and own our facility in downtown Grand Rapids which serves as our
bank&#146;s main office and Mercantile Bank Corporation&#146;s headquarters. Mercantile Bank Capital Trust I
(the &#147;Mercantile trust&#148;), a business trust subsidiary, was formed in September&nbsp;2004 to issue trust
preferred securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To date we have raised capital from our initial public offering of common stock in October
1997, a public offering of common stock in July&nbsp;1998, three private placements of common stock
during 2001, a public offering of common stock in August&nbsp;2001 and a public offering of common stock
in September&nbsp;2003. In addition, we raised capital through a public offering of $16.0&nbsp;million of
trust preferred securities in 1999, which was refinanced as part of a $32.0&nbsp;million private
placement of trust preferred securities in 2004. Our expenses have generally been paid using the
proceeds of the capital sales and dividends from our bank. Our principal source of future
operating funds is expected to be dividends from our bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We filed an election to become a financial holding company, pursuant to the Bank Holding
Company Act, as amended by Title I of the Gramm-Leach-Bliley Act and implementing Federal Reserve
Board regulations, which election became effective March&nbsp;23, 2000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Bank</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our bank is a state banking company that operates under the laws of the State of Michigan,
pursuant to a charter issued by the Michigan Office of Financial and Insurance Regulation. Our
bank&#146;s deposits are insured to the maximum extent permitted by law by the Federal Deposit Insurance
Corporation (&#147;FDIC&#148;). Our bank&#146;s primary service area is the Kent and Ottawa County areas of West
Michigan, which includes the City of Grand Rapids, the second largest city in the State of
Michigan. In addition, our bank opened new offices in the cities of East Lansing and Ann Arbor,
Michigan, during 2005, and in Novi, Michigan, during 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our bank, through its nine offices, provides commercial and retail banking services primarily
to small- to medium-sized businesses based in and around the Grand Rapids, Holland, Lansing, Ann
Arbor and Oakland County areas. These offices consist of a main office located at 310 Leonard
Street NW, Grand Rapids, Michigan, a combination branch and retail loan center located at 4613
Alpine Avenue NW, Comstock Park, Michigan, a combination branch and operations center located at
5610 Byron Center Avenue SW, Wyoming, Michigan, and branches located at 4860 Broadmoor Avenue SE,
Kentwood, Michigan, 3156 Knapp Street NE, Grand Rapids, Michigan, 880 East 16<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Street,
Holland, Michigan, 3737 Coolidge Road, East Lansing, Michigan, 325 Eisenhower Parkway, Ann Arbor,
Michigan, and 28350 Cabot Drive, Novi, Michigan.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->2.<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our bank makes secured and unsecured commercial, construction, mortgage and consumer loans,
and accepts checking, savings and time deposits. Our bank owns seven automated teller machines
(&#147;ATM&#148;), located at our branch locations in Grand Rapids, Holland and East Lansing, that
participate in the MAC, NYCE and PLUS regional network systems, as well as other ATM networks
throughout the country. Our bank also
enables customers to conduct certain loan and deposit transactions by telephone and personal
computer. Courier service is provided to certain commercial customers, and safe deposit facilities
are available at our branch locations in Grand Rapids, Holland and East Lansing. Our bank does not
have trust powers. In December&nbsp;2001, our bank entered into a joint brokerage services and
marketing agreement with Raymond James Financial Services, Inc. to make available to its customers
financial planning, retail brokerage, equity research, insurance and annuities, retirement
planning, trust services and estate planning. The joint brokerage services and marketing agreement
was terminated during the first quarter 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Mortgage Company</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our mortgage company&#146;s predecessor, Mercantile Bank Mortgage Company, commenced operations on
October&nbsp;24, 2000, when our bank contributed most of its residential mortgage loan portfolio and
participation interests in certain commercial mortgage loans to Mercantile Bank Mortgage Company.
On the same date, our bank also transferred its residential mortgage origination function to
Mercantile Bank Mortgage Company. On January&nbsp;1, 2004, Mercantile Bank Mortgage Company was
reorganized as Mercantile Bank Mortgage Company, LLC, a limited liability company, which is 99%
owned by our bank and 1% owned by our insurance company. The reorganization had no impact on the
company&#146;s financial position or results of operations. Mortgage loans originated and held by our
mortgage company are serviced by our bank pursuant to a servicing agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Insurance Company</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our insurance company acquired an existing shelf insurance agency effective April&nbsp;15, 2002.
An Agency and Institution Agreement was entered into among our insurance company, our bank and Hub
International for the purpose of providing programs of mass marketed personal lines of insurance.
Insurance product offerings include private passenger automobile, homeowners, personal inland
marine, boat owners, recreational vehicle, dwelling fire, umbrella policies, small business and
life insurance products, all of which are provided by and written through companies that have
appointed Hub International as their agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Real Estate Company</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our real estate company was organized on July&nbsp;21, 2003, principally to develop, construct and
own our facility in downtown Grand Rapids that serves as our bank&#146;s main office and Mercantile Bank
Corporation&#146;s headquarters. This facility was placed into service during the second quarter of
2005. Our real estate company is 99% owned by our bank and 1% owned by our insurance company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The Mercantile Trust</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004, we formed the Mercantile trust, a Delaware business trust. Mercantile trust&#146;s
business and affairs are conducted by its property trustee, a Delaware trust company, and three
individual administrative trustees who are employees and officers of the company. Mercantile trust
was established for the purpose of issuing and selling its Series&nbsp;A and Series&nbsp;B trust preferred
securities and common securities, and used the proceeds from the sales of those securities to
acquire Series&nbsp;A and Series&nbsp;B Floating Rate Notes issued by the company. Substantially all of the
net proceeds received by the company from the Series&nbsp;A transaction were used to redeem the trust
preferred securities that had been issued by MBWM Capital Trust I in September&nbsp;1999. We
established MBWM Capital Trust I in 1999 to issue the trust preferred securities that were
redeemed. Substantially all of the net proceeds received by the company from the Series&nbsp;B
transaction were contributed to our bank as capital. The Series&nbsp;A and Series&nbsp;B Floating Rate Notes
are categorized on our consolidated financial statements as subordinated debentures. Additional
information regarding Mercantile trust is incorporated by reference to &#147;Note 17 &#151; Subordinated
Debentures&#148; and &#147;Note 18 &#151; Regulatory Matters&#148; of the Notes to Consolidated Financial Statements
included in this Annual Report.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Effect of Government Monetary Policies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our earnings are affected by domestic economic conditions and the monetary and fiscal policies
of the United States government, its agencies, and the Federal Reserve Board. The Federal Reserve
Board&#146;s monetary policies have had, and will likely continue to have, an important impact on the
operating results of commercial banks through its power to implement national monetary policy in
order to, among other things, curb inflation, maintain employment, and mitigate economic
recessions. The policies of the Federal Reserve
Board have a major effect upon the levels of bank loans, investments and deposits through its open
market operations in United States government securities, and through its regulation of, among
other things, the discount rate on borrowings of member banks and the reserve requirements against
member bank deposits. Our bank maintains reserves directly with the Federal Reserve Bank of
Chicago to the extent required by law. It is not possible to predict the nature and impact of
future changes in monetary and fiscal policies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Regulation and Supervision</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a bank holding company under the Bank Holding Company Act, we are required to file an
annual report with the Federal Reserve Board and such additional information as the Federal Reserve
Board may require. We are also subject to examination by the Federal Reserve Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bank Holding Company Act limits the activities of bank holding companies that have not
qualified as financial holding companies to banking and the management of banking organizations,
and to certain non-banking activities. These non-banking activities include those activities that
the Federal Reserve Board found, by order or regulation as of the day prior to enactment of the
Gramm-Leach-Bliley Act, to be so closely related to banking as to be a proper incident to banking.
These non-banking activities include, among other things: operating a mortgage company, finance
company, or factoring company; performing certain data processing operations; providing certain
investment and financial advice; acting as an insurance agent for certain types of credit-related
insurance; leasing property on a full-payout, nonoperating basis; and providing discount securities
brokerage services for customers. With the exception of the activities of our mortgage company
discussed above, neither we nor any of our subsidiaries engages in any of the non-banking
activities listed above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2000, our election to become a financial holding company, as permitted by the Bank
Holding Company Act, as amended by Title I of the Gramm-Leach-Bliley Act, was accepted by the
Federal Reserve Board. In order to continue as a financial holding company, we and our bank must
satisfy statutory requirements regarding capitalization, management, and compliance with the
Community Reinvestment Act. As a financial holding company, we are permitted to engage in a
broader range of activities than are permitted to bank holding companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Those expanded activities include any activity which the Federal Reserve Board (in certain
instances in consultation with the Department of the Treasury) determines, by order or regulation,
to be financial in nature or incidental to such financial activity, or to be complementary to a
financial activity and not to pose a substantial risk to the safety or soundness of depository
institutions or the financial system generally. Such expanded activities include, among others:
insuring, guaranteeing, or indemnifying against loss, harm, damage, illness, disability or death,
or issuing annuities, and acting as principal, agent, or broker for such purposes; providing
financial, investment, or economic advisory services, including advising a mutual fund; and
underwriting, dealing in, or making a market in securities. Other than the insurance agency
activities of our insurance company, neither we nor our subsidiaries presently engage in any of the
expanded activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our bank is subject to restrictions imposed by federal law and regulation. Among other
things, these restrictions apply to any extension of credit to us or to our other subsidiaries, to
investments in stock or other securities that we issue, to the taking of such stock or securities
as collateral for loans to any borrower, and to acquisitions of assets or services from, and sales
of certain types of assets to, us or our other subsidiaries. Federal law restricts our ability to
borrow from our bank by limiting the aggregate amount we may borrow and by requiring that all loans
to us be secured in designated amounts by specified forms of collateral.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to the acquisition of banking organizations, we are generally required to obtain
the prior approval of the Federal Reserve Board before we can acquire all or substantially all of
the assets of any bank, or acquire ownership or control of any voting shares of any bank or bank
holding company, if, after the acquisition, we would own or control more than 5% of the voting
shares of the bank or bank holding company. Acquisitions of banking organizations across state
lines are subject to restrictions imposed by Federal and state laws and regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Employees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2008, we and our bank employed 269 full-time and 71 part-time persons.
Management believes that relations with employees are good.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Lending Policy</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a routine part of our business, we make loans and leases to businesses and individuals
located within our market areas. Our lending policy states that the function of the lending
operation is twofold: to provide a means for the investment of funds at a profitable rate of return
with an acceptable degree of risk, and to meet the credit needs of the creditworthy businesses and
individuals who are our customers. We recognize that in the normal business of lending, some
losses on loans and leases will be inevitable and should be considered a part of the normal cost of
doing business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our lending policy anticipates that priorities in extending loans and leases will be modified
from time to time as interest rates, market conditions and competitive factors change. The policy
sets forth guidelines on a nondiscriminatory basis for lending in accordance with applicable laws
and regulations. The policy describes various criteria for granting loans and leases, including
the ability to pay; the character of the customer; evidence of financial responsibility; purpose of
the loan or lease; knowledge of collateral and its value; terms of repayment; source of repayment;
payment history; and economic conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The lending policy further limits the amount of funds that may be loaned or leased against
specified types of real estate collateral. For certain loans secured by real estate, the policy
requires an appraisal of the property offered as collateral by a state certified independent
appraiser. The policy also provides general guidelines for loan to value and lease to value limits
for other types of collateral, such as accounts receivable and machinery and equipment. In
addition, the policy provides general guidelines as to environmental analysis, loans to employees,
executive officers and directors, problem loan and lease identification, maintenance of an
allowance for loan and lease losses, loan and lease review and grading, mortgage and consumer
lending, and other matters relating to our lending practices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has delegated significant lending authority to officers of our bank.
The Board of Directors believes this empowerment, supported by our strong credit culture and the
significant experience of our commercial lending staff, makes us responsive to our customers. The
loan policy currently specifies lending authority for certain officers up to $5.0&nbsp;million, and
$10.0&nbsp;million for our bank&#146;s Chairman of the Board and Chief Executive Officer; however, the $10.0
million lending authority is generally used only in rare circumstances where timing is of the
essence. Generally, loan requests exceeding $2.5&nbsp;million require approval by the Officers Loan
Committee, and loan requests exceeding $4.0&nbsp;million, up to the legal lending limit of approximately
$33.6&nbsp;million, require approval by the Board of Directors. In most circumstances, we apply an
in-house lending limit that is significantly less than our bank&#146;s legal lending limit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Lending Activity</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Commercial Loans. </I>Our commercial lending group originates commercial loans and leases
primarily in our market areas. Our commercial lenders have extensive commercial lending
experience, with most having at least ten years&#146; experience. Loans and leases are originated for
general business purposes, including working capital, accounts receivable financing, machinery and
equipment acquisition, and commercial real estate financing, including new construction and land
development.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Working capital loans are often structured as a line of credit and are reviewed periodically
in connection with the borrower&#146;s year-end financial reporting. These loans are generally secured
by substantially all of the assets of the borrower, and have an interest rate tied to the
Mercantile Prime Rate. Loans and leases for machinery and equipment purposes typically have a
maturity of three to five years and are fully amortizing, while commercial real estate loans are
usually written with a five-year maturity and amortize over a 15 to 20&nbsp;year period. Commercial
loans and leases typically have an interest rate that is fixed to maturity or is tied to the
Mercantile Prime Rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We evaluate many aspects of a commercial loan or lease transaction in order to minimize credit
and interest rate risk. Underwriting includes an assessment of the management, products, markets,
cash flow, capital, income and collateral. This analysis includes a review of the borrower&#146;s
historical and projected financial results. Appraisals are generally required by certified
independent appraisers where real estate is the primary collateral, and in some cases, where
equipment is the primary collateral. In certain situations, for creditworthy customers, we may
accept title reports instead of requiring lenders&#146; policies of title insurance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial real estate lending involves more risk than residential lending because loan
balances are greater and repayment is dependent upon the borrower&#146;s business operations. We
attempt to minimize the risks associated with these transactions by generally limiting our
commercial real estate lending to owner-operated properties of well-known customers or new
customers whose businesses have an established profitable history. In many cases, risk is further
reduced by limiting the amount of credit to any one borrower to an amount considerably less than
our legal lending limit and avoiding certain types of commercial real estate financings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have no material foreign loans, and no material loans to energy producing customers. We
have only limited exposure to companies engaged in agricultural-related activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Single-Family Residential Real Estate Loans. </I>Our mortgage company originates single-family
residential real estate loans in our market area, usually according to secondary market
underwriting standards. Loans not conforming to those standards are made in limited circumstances.
Single-family residential real estate loans provide borrowers with a fixed or adjustable interest
rate with terms up to 30&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our bank has a home equity line of credit program. Home equity credit is generally secured by
either a first or second mortgage on the borrower&#146;s primary residence. The program provides
revolving credit at a rate tied to the Wall Street Journal Prime Rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Consumer Loans. </I>We originate consumer loans for a variety of personal financial needs,
including new and used automobiles, boat loans, credit cards and overdraft protection for our
checking account customers. Consumer loans generally have shorter terms and higher interest rates
and usually involve more credit risk than single-family residential real estate loans because of
the type and nature of the collateral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe our consumer loans are underwritten carefully, with a strong emphasis on the amount
of the down payment, credit quality, employment stability and monthly income of the borrower.
These loans are generally repaid on a monthly repayment schedule with the source of repayment tied
to the borrower&#146;s periodic income. In addition, consumer lending collections are dependent on the
borrower&#146;s continuing financial stability, and are thus likely to be adversely affected by job
loss, illness and personal bankruptcy. In many cases, repossessed collateral for a defaulted
consumer loan will not provide an adequate source of repayment of the outstanding loan balance
because of depreciation of the underlying collateral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the generally higher yields earned on consumer loans compensate for the
increased credit risk associated with such loans, and that consumer loans are important to our
efforts to serve the credit needs of the communities and customers that we serve.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Loan and Lease Portfolio Quality</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We utilize a comprehensive grading system for our commercial loans and leases as well as
residential mortgage and consumer loans. All commercial loans and leases are graded on a ten grade
rating system. The rating system utilizes standardized grade paradigms that analyze several
critical factors such as cash flow, management and collateral coverage. All commercial loans and
leases are graded at inception and reviewed at various intervals thereafter. Residential mortgage
and consumer loans are graded on a random sampling basis after the loan has been made using a
separate standardized grade paradigm that analyzes several critical factors such as debt-to-income
and credit and employment histories.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our independent loan and lease review program is primarily responsible for the administration
of the grading system and ensuring adherence to established lending policies and procedures. The
loan and lease review program is an integral part of maintaining our strong asset quality culture.
The loan and lease review function works closely with senior management, although it functionally
reports to the Board of Directors. All commercial loan and lease relationships equal to or
exceeding $1.8&nbsp;million are formally reviewed every twelve months, with a random sampling performed
on credits under $1.8&nbsp;million. Our watch list credits are reviewed monthly by our Watch List
Committee, which is comprised of personnel from the administration, lending and loan and lease
review functions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans and leases are placed in a nonaccrual status when, in our opinion, uncertainty exists as
to the ultimate collection of principal and interest. As of December&nbsp;31, 2008, loans and leases
placed in nonaccrual status totaled $47.9&nbsp;million, or 2.58% of total loans and leases. As of the
same date, loans and leases past due 90&nbsp;days or more and still accruing interest totaled $1.4
million, or 0.07% of total loans and leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional detail and information relative to the loan and lease portfolio is incorporated by
reference to Management&#146;s Discussion and Analysis of Financial Condition and Results of Operation
(&#147;Management&#146;s Discussion and Analysis&#148;) and Note 3 of the Consolidated Financial Statements in
this Annual Report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Allowance for Loan and Lease Losses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In each accounting period, we adjust the allowance for loan and lease losses (&#147;allowance&#148;) to
the amount we believe is necessary to maintain the allowance at adequate levels. Through the loan
and lease review and credit departments, we attempt to allocate specific portions of the allowance
based on specifically identifiable problem loans and leases. The evaluation of the allowance is
further based on, but not limited to, consideration of the internally prepared Reserve Analysis,
composition of the loan and lease portfolio, third party analysis of the loan and lease
administration processes and portfolio and general economic conditions. In addition, the
historical strong commercial loan and lease growth and expansions into new markets are taken into
account.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Reserve Analysis, used since our inception and completed monthly, applies reserve
allocation factors to outstanding loan and lease balances to calculate an overall allowance dollar
amount. For commercial loans and leases, which continue to comprise the vast majority of our total
loans and leases, reserve allocation factors are based upon the loan ratings as determined by our
standardized grade paradigms. For retail loans, reserve allocation factors are based upon the type
of credit. Adjustments for specific lending relationships, including impaired loans and leases,
are made on a case-by-case basis. The reserve allocation factors are primarily based on the recent
levels and historical trends of net loan charge-offs and non-performing assets, the comparison of
the recent levels and historical trends of net loan charge-offs and non-performing assets with a
customized peer group consisting of ten similarly-sized publicly traded banking organizations
conducting business in the states of Michigan, Illinois, Indiana or Ohio, the review and
consideration of our loan and lease migration analysis and the experience of senior management
making similar loans and leases for an extensive period of time. We regularly review the Reserve
Analysis and make adjustments periodically based upon identifiable trends and experience.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the present allowance is adequate, based on the broad range of considerations
listed above.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary risks associated with commercial loans and leases are the financial condition of
the borrower, the sufficiency of collateral, and lack of timely payment. We have a policy of
requesting and reviewing periodic financial statements from our commercial loan and lease
customers, and periodically reviewing existence of collateral and its value. The primary risk
element that we consider for consumer and residential real estate loans is lack of timely payment.
We have a reporting system that monitors past due loans and have adopted policies to pursue our
creditor&#146;s rights in order to preserve our bank&#146;s collateral position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional detail regarding the allowance is incorporated by reference to Management&#146;s
Discussion and Analysis and Note 3 of the Notes to Consolidated Financial Statements of the Company
included in this Annual Report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we believe the allowance is adequate to absorb probable incurred losses as they
arise, there can be no assurance that we will not sustain losses in any given period which could be
substantial in relation to, or greater than, the size of the allowance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Investments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Bank Holding Company Investments</I>. The principal investments of our bank holding company are
the investments in the common stock of our bank and the common securities of Mercantile trust.
Other funds of our bank holding company may be invested from time to time in various debt
instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a bank holding company, we are also permitted to make portfolio investments in equity
securities and to make equity investments in subsidiaries engaged in a variety of non-banking
activities, which include real estate-related activities such as community development, real estate
appraisals, arranging equity financing for commercial real estate, and owning and operating real
estate used substantially by our bank or acquired for its future use. In addition, our bank
holding company&#146;s qualification as a financial holding company enables us to make equity
investments in companies engaged in a broader range of financial activities than we could do
without that qualification. Such expanded activities include insuring, guaranteeing, or
indemnifying against loss, harm, damage, illness, disability or death, or issuing annuities, and
acting as principal, agent, or broker for such purposes; providing financial, investment, or
economic advisory services, including advising a mutual fund; and underwriting, dealing in, or
making a market in securities. Our bank holding company has no plans at this time to make directly
any of these equity investments at the bank holding company level. Our Board of Directors may,
however, alter the investment policy at any time without shareholder approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, so long as our bank holding company is qualified as a financial holding company,
it would be permitted, as part of the business of underwriting or merchant banking activity and
under certain circumstances and procedures, to invest in shares or other ownership interests in, or
assets of, companies engaged in non-financial activities. In order to make those investments, our
bank holding company would be required (i)&nbsp;to become, or to have an affiliate that is, a registered
securities broker or dealer or a registered municipal securities dealer, or (ii)&nbsp;to control both an
insurance company predominantly engaged in underwriting life, accident and health, or property and
casualty insurance (other than credit insurance) or issuing annuities, and a registered investment
adviser that furnishes investment advice to an insurance company. We do not currently have any
securities, insurance, or investment advisory affiliates of the required types, nor does our bank
holding company have any current plans to make any of the equity investments described in this
paragraph.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Our Bank&#146;s Investments</I>. Our bank may invest its funds in a wide variety of debt instruments
and may participate in the federal funds market with other depository institutions. Subject to
certain exceptions, our bank is prohibited from investing in equity securities. Among the equity
investments permitted for our bank under various conditions and subject in some instances to amount
limitations, are shares of a subsidiary insurance agency, mortgage company, real estate company, or
Michigan business and industrial development company, such as our insurance company, our mortgage
company, or our real estate company. Under another such exception, in certain circumstances and
with prior notice to or approval of the FDIC, our bank could invest up to 10% of its total assets
in the equity securities of a subsidiary corporation engaged in the acquisition and development of
real property for sale, or the improvement of real property by construction or rehabilitation of
residential or commercial units for sale or lease. Our bank has no present plans to make such an
investment. Real estate acquired by our bank in satisfaction of or foreclosure upon loans may be
held by our bank for specified periods. Our bank is also permitted to invest in such real estate
as is necessary for the convenient transaction of its business. Our bank&#146;s Board of Directors may
alter the bank&#146;s investment policy without shareholder approval at any time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional detail and information relative to the securities portfolio is incorporated by
reference to Management&#146;s Discussion and Analysis and Note 2 of the Notes to Consolidated Financial
Statements included in this Annual Report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Competition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary markets for loans and core deposits are the Grand Rapids, Holland, Lansing, Ann
Arbor and Oakland County metropolitan areas. We face substantial competition in all phases of our
operations from a variety of different competitors. We compete for deposits, loans and other
financial services with numerous
Michigan-based and out-of-state banks, savings banks, thrifts, credit unions and other financial
institutions as well as from other entities that provide financial services. Some of the financial
institutions and financial service organizations with which we compete are not subject to the same
degree of regulation as we are. Many of our primary competitors have been in business for many
years, have established customer bases, are larger, have substantially higher lending limits than
we do, and offer larger branch networks and other services which we do not. Most of these same
entities have greater capital resources than we do, which, among other things, may allow them to
price their services at levels more favorable to the customer and to provide larger credit
facilities than we do. Under the Gramm-Leach-Bliley Act, effective March&nbsp;11, 2000, securities
firms and insurance companies that elect to become financial holding companies may acquire banks
and other financial institutions. The Gramm-Leach-Bliley Act affects the competitive environment
in which we conduct our business. The financial services industry is also likely to become more
competitive as further technological advances enable more companies to provide financial services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Selected Statistical Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management&#146;s Discussion and Analysis beginning on Page F-4 in this Annual Report includes
selected statistical information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Return on Equity and Assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Return on Equity and Asset information is included in Management&#146;s Discussion and Analysis
beginning on Page F-4 in this Annual Report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Available Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain an internet website at <U>www.mercbank.com</U>. We make available on or through our
website, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practical after we
electronically file such material with, or furnish it to, the Securities and Exchange Commission.
We do not intend the address of our website to be an active link or to otherwise incorporate the
contents of our website into this Annual Report.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<!-- link2 "Item&nbsp;1A. Risk Factors." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1A. Risk Factors.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following risk factors could affect our business, financial condition or results of
operations. These risk factors should be considered in connection with evaluating the
forward-looking statements contained in this Annual Report because they could cause the actual
results and conditions to differ materially from those projected in forward-looking statements.
Before you buy our common stock, you should know that investing in our common stock involves risks,
including the risks described below. The risks that are highlighted here are not the only ones we
face. If the adverse matters referred to in any of the risks actually occur, our business,
financial condition or operations could be adversely affected. In that case, the trading price of
our common stock could decline, and you may lose all or part of your investment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Difficult market conditions have adversely affected our industry.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dramatic declines in the housing market over the past two years, with falling home prices and
increasing foreclosures, unemployment and under-employment, have negatively impacted the credit
performance of real estate related loans and resulted in significant write-downs of asset values by
financial institutions. These write-downs, initially of asset-backed securities but spreading to
other securities and loans, have caused many financial institutions to seek additional capital, to
reduce or eliminate dividends, to merge with larger and stronger institutions and, in some cases,
to fail. Reflecting concern about the stability of the financial markets generally and the
strength of counterparties, many lenders and institutional investors have reduced or ceased
providing funding to borrowers, including to other financial institutions. This market turmoil and
tightening of credit have led to an increased level of commercial and consumer delinquencies, lack
of consumer confidence, increased market volatility and widespread reduction of business activity
generally. The resulting economic pressure on consumers and lack of confidence in the financial
markets has adversely affected our business, financial condition and results of operations. Market
developments may affect consumer confidence levels and may cause adverse changes in payment
patterns, causing increases in delinquencies and default rates, which may impact our charge-offs
and provision for credit losses. A worsening of these
conditions would likely exacerbate the adverse effects of these difficult market conditions on
us and others in the financial institutions industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Current levels of market volatility are unprecedented.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The capital and credit markets have been experiencing volatility and disruption for more than
12&nbsp;months. In more recent months, the volatility and disruption have reached unprecedented levels.
In some cases, the markets have produced downward pressure on stock prices and credit availability
for certain issuers without apparent regard to those issuers&#146; underlying financial strength. The
current levels of market disruption and volatility have an adverse effect, which may be material,
on our ability to access capital and on our business, financial condition and results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Adverse changes in economic conditions or interest rates may negatively affect our earnings,
capital and liquidity.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The results of operations for financial institutions, including our bank, may be materially
and adversely affected by changes in prevailing local and national economic conditions, including
declines in real estate market values and the related declines in value of our real estate
collateral, rapid increases or decreases in interest rates and changes in the monetary and fiscal
policies of the federal government. Our profitability is heavily influenced by the spread between
the interest rates we earn on loans and investments and the interest rates we pay on deposits and
other interest-bearing liabilities. Substantially all of our loans are to businesses and
individuals in western, south central, or southeastern Michigan, and the decline in the economy of
these areas has adversely affected us. Additional stresses on our financial condition are likely
given the deteriorated economic conditions within our markets. Like most banking institutions, our
net interest spread and margin will be affected by general economic conditions and other factors
that influence market interest rates and our ability to respond to changes in these rates. At any given time, our assets and liabilities
may be such that they will be affected differently by a given change in interest rates.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The soundness of other financial institutions could adversely affect us.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ability to engage in routine funding transactions could be adversely affected by the
actions and commercial soundness of other financial institutions. Financial services institutions
are interrelated as a result of trading, clearing, counterparty or other relationships. We have
exposure to many different industries and counterparties, and we routinely execute transactions
with counterparties in the financial industry. As a result, defaults by, or even rumors or
questions about, one or more financial services institutions, or the financial services industry
generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or
by other institutions. Even routine funding transactions expose us to credit risk in the event of
default of our counterparty or client. In addition, our credit risk may be exacerbated when the
collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover
the full amount of the financial instrument exposure due us. There is no assurance that any such
losses would not materially and adversely affect our results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>There can be no assurance that recently enacted legislation will stabilize the U.S. financial
system.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of
2008 (the &#147;EESA&#148;). The legislation was the result of a proposal by Treasury Secretary Henry Paulson
to the U.S. Congress in response to the financial crisis affecting the banking system, financial
markets, and other financial institutions. Among other things, the EESA established the Troubled
Asset Relief Program, or TARP. Under TARP, the U.S. Treasury was given the authority, among other
things, to purchase up to $700&nbsp;billion of mortgages, mortgage-backed securities and certain other
financial instruments from financial institutions and others for the purpose of stabilizing and
providing liquidity to the U.S. financial markets. On October&nbsp;14, 2008, the U.S. Treasury
announced a program under the EESA pursuant to which it would make senior preferred stock
investments in qualifying financial institutions (the &#147;TARP Capital Purchase Program&#148;). Also on
October&nbsp;14, 2008, the Federal Deposit Insurance Corporation announced the development of a
guarantee program under the systemic risk exception to the Federal Deposit Insurance Act pursuant
to which the FDIC would, among other things, offer a guarantee of certain financial institution
indebtedness in exchange for an insurance premium to be paid to the FDIC by issuing financial
institutions (the &#147;FDIC Temporary Liquidity Guarantee Program&#148;). On February&nbsp;17, 2009, President
Obama signed into law the American Recovery and Reinvestment Act of 2009 (the &#147;ARRA&#148;), a further
package of economic stimulus measures. In addition, Treasury Secretary Geithner has announced
further measures to address the crisis in the financial services sector. There can be no
assurance, however, as to the actual impact that the EESA, the ARRA, their respective implementing
regulations, the programs of the FDIC or any other governmental agency, or any further legislation,
will have on the financial markets. The failure to stabilize the financial markets, and a
continuation or worsening of current financial market conditions, could materially and adversely
affect our business, financial condition, results of operations, access to credit or the trading
price of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The impact on us of recently enacted legislation, in particular the Emergency Economic
Stabilization Act of 2008 and its implementing regulations, and actions by the FDIC, cannot be
predicted at this time.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The programs established or to be established under the EESA and TARP or other legislation may
have adverse effects upon us. We may face increased regulation of our industry. Compliance with
such regulation may increase our costs and limit our ability to pursue business opportunities.
Also, participation in specific programs may subject us to additional restrictions. For example,
participation in the TARP Capital Purchase Program would limit (without the consent of the U.S.
Treasury) our ability to increase our dividend or to repurchase our common stock for so long as any
securities issued by us under such program remained outstanding. It would also subject us to
additional executive compensation restrictions. The effects of participating or not participating
in any such programs, and the extent of our participation in such programs, cannot reliably be
determined at this time.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our credit losses could increase and our allowance for loan and lease losses may not be adequate to
cover actual loan losses.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The risk of nonpayment of loans is inherent in all lending activities, and nonpayment, when it
occurs, may have a materially adverse effect on our earnings and overall financial condition as
well as the value of our common stock. Our focus on commercial lending may result in a larger
concentration of loans to small businesses. As a result, we may assume different or greater
lending risks than other banks. We make various assumptions and judgments about the collectibility
of our loan portfolio and provide an allowance for losses based on several factors. If our
assumptions are wrong, our allowance for loan and lease losses may not be sufficient to cover our
losses, which would have an adverse effect on our operating results. The actual amounts of future
provisions for loan and lease losses cannot be determined at this time and may exceed the amounts
of past provisions. Additions to our allowance for loan and lease losses decrease our net income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We rely heavily on our management and other key personnel, and the loss of any of them may
adversely affect our operations.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are and will continue to be dependent upon the services of our management team, including
Michael H. Price, Chairman of the Board, President and Chief Executive Officer, and our other
senior managers. The loss of Mr.&nbsp;Price, or any of our other senior managers, could have an adverse
effect on our growth and performance. We have entered into employment contracts with Mr.&nbsp;Price and
two other executive officers. The contracts provide for a three year employment period that is
extended for an additional year each year unless a notice is given indicating that the contract
will not be extended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we continue to depend on our city and regional presidents and key commercial loan
officers. Our city and regional presidents and several of our commercial loan officers are
responsible, or share responsibility, for generating and managing a significant portion of our
commercial loan and lease portfolio. Our success can be attributed in large part to the
relationships these officers as well as members of our management team have developed and are able
to maintain with our customers as we continue to implement our community banking philosophy. The
loss of any of these commercial loan officers could adversely affect our loan and lease portfolio
and performance, and our ability to generate new loans and leases. Many of our key employees have
signed agreements with us agreeing not to compete with us in one or more of our markets for
specified time periods if they leave employment with us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of the other financial institutions in our markets also require their key employees to
sign agreements that preclude or limit their ability to leave their employment and compete with
them or solicit their customers. These agreements make it more difficult for us to hire loan
officers with experience in our markets who can immediately solicit their former or new customers
on our behalf.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Decline in the availability of out-of-area deposits could cause liquidity or interest rate margin
concerns, or limit our growth.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have utilized and expect to continue to utilize out-of-area or wholesale deposits to
support our asset growth. These deposits are generally a lower cost source of funds when compared
to the interest rates that we would have to offer in our local markets to generate a commensurate
level of funds. In addition, the overhead costs associated with wholesale deposits are
considerably less than the overhead costs we would incur to obtain and administer a similar level
of local deposits. A decline in the availability of these wholesale deposits would require us to
fund our growth with more costly funding sources, which could reduce our net interest margin, limit
our growth, reduce our asset size, or increase our overhead costs. Wholesale deposits include
deposits obtained through brokers. If a bank is not well capitalized, regulatory approval is
required to accept brokered deposits.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Future sales of our common stock or other securities may dilute the value of our common stock.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In many situations, our Board of Directors has the authority, without any vote of our
shareholders, to issue shares of our authorized but unissued preferred or common stock, including
shares authorized and unissued under our Stock Incentive Plan of 2006. In the future, we may issue
additional securities, through public or private offerings, in order to raise additional capital.
Any such issuance would dilute the percentage of ownership interest of existing shareholders and
may dilute the per share book value of the common stock. In addition, option holders under our
stock-based incentive plans may exercise their options at a time when we would otherwise be able to
obtain additional equity capital on more favorable terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our growth and expansion may be limited by many factors.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary growth strategy has been to grow internally by increasing our business in the
western Michigan area, and more recently in the Lansing, Ann Arbor and Oakland County areas of
Michigan. We are also considering other areas in which we may expand our business. This internal
growth strategy depends in large part on generating an increasing level of loans and deposits at
acceptable risk and interest rate levels without commensurate increases in non-interest expenses.
There can be no assurance that we will be successful in continuing our growth strategy due to
delays and other impediments resulting from regulatory oversight, limited availability of qualified
personnel and favorable and cost effective branch sites, and management time, capital, and expenses
required to develop new branch sites and markets. In addition, the success of our growth strategy
will depend on maintaining sufficient regulatory capital levels and on adequate economic conditions
in our market areas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, although we have no current plans to do so, we may acquire banks, related
businesses or branches of other financial institutions that we believe provide a strategic fit with
our business. To the extent that we grow through acquisitions, we cannot assure you that we will
be able to adequately or profitably manage this growth. Acquiring other banks, businesses, or
branches involves risks commonly associated with acquisitions, including exposure to unknown or
contingent liabilities and asset quality issues, difficulty and expense of integrating the
operations and personnel, potential disruption to our business including the diversion of
management&#146;s time and attention, and the possible loss of key employees and customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our future success is dependent on our ability to compete effectively in the highly competitive
banking industry.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We face substantial competition in all phases of our operations from a variety of different
competitors. Our future growth and success will depend on our ability to compete effectively in
this highly competitive environment. We compete for deposits, loans and other financial services
with numerous Michigan-based and out-of-state banks, thrifts, credit unions and other financial
institutions as well as other entities that provide financial services, including securities firms
and mutual funds. Some of the financial institutions and financial service organizations with
which we compete are not subject to the same degree of regulation as we are. Most of our
competitors have been in business for many years, have established customer bases, are larger, have
substantially higher lending limits than we do and offer branch networks and other services which
we do not, including trust and international banking services. Most of these entities have greater
capital and other resources than we do, which, among other things, may allow them to price their
services at levels more favorable to the customer and to provide larger credit facilities than we
do. This competition may limit our growth or earnings. Under the Gramm-Leach-Bliley Act of 1999,
effective March&nbsp;11, 2000, securities firms and insurance companies that elect to become financial
holding companies may acquire banks and other financial institutions. The Gramm-Leach-Bliley Act
affects the competitive environment in which we conduct business. The financial services industry
is also likely to become more competitive as further technological advances enable more companies
to provide financial services. These technological advances may diminish the importance of
depository institutions and other financial intermediaries in the transfer of funds between
parties.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We are subject to significant government regulation, and any regulatory changes may adversely
affect us.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The banking industry is heavily regulated under both federal and state law. These regulations
are primarily intended to protect customers, not our creditors or shareholders. Existing state and
federal banking laws subject us to substantial limitations with respect to the making of loans, the
purchase of securities, the payment of dividends and many other aspects of our business. Some of
these laws may benefit us, others may increase our costs of doing business, or otherwise adversely
affect us and create competitive advantages for others. Regulations affecting banks and financial
services companies undergo continuous change, and we cannot predict the ultimate effect of these
changes, which could have a material adverse effect on our profitability or financial condition.
Federal economic and monetary policy may also affect our ability to attract deposits, make loans
and achieve satisfactory interest spreads.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We continually encounter technological change, and we may have fewer resources than our competitors
to continue to invest in technological improvements.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The banking industry is undergoing technological changes with frequent introductions of new
technology-driven products and services. In addition to better serving customers, the effective
use of technology increases efficiency and enables financial institutions to reduce costs. Our
future success will depend, in part, on our ability to address the needs of our customers by using
technology to provide products and services that will satisfy customer demands for convenience as
well as create additional efficiencies in our operations. Many of our competitors have
substantially greater resources to invest in technological improvements. There can be no assurance
that we will be able to effectively implement new technology-driven products and services or be
successful in marketing these products and services to our customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Articles of Incorporation and By-laws and the laws of Michigan contain provisions that may
discourage or prevent a takeover of our company and reduce any takeover premium.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Articles of Incorporation and By-laws, and the corporate laws of the State of Michigan,
include provisions which are designed to provide our Board of Directors with time to consider
whether a hostile takeover offer is in our and our shareholders&#146; best interest. These provisions,
however, could discourage potential acquisition proposals and could delay or prevent a change in
control. The provisions also could diminish the opportunities for a holder of our common stock to
participate in tender offers, including tender offers at a price above the then-current market
price for our common stock. These provisions could also prevent transactions in which our
shareholders might otherwise receive a premium for their shares over then-current market prices,
and may limit the ability of our shareholders to approve transactions that they may deem to be in
their best interests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Michigan Business Corporation Act contains provisions intended to protect shareholders and
prohibit or discourage various types of hostile takeover activities. In addition to these
provisions and the provisions of our Articles of Incorporation and Bylaws, federal law requires the
Federal Reserve Board&#146;s approval prior to acquiring &#147;control&#148; of a bank holding company. All of
these provisions may delay or prevent a change in control without action by our shareholders and
could adversely affect the price of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>There is a limited trading market for our common stock.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The price of our common stock has been, and will likely continue to be, subject to
fluctuations based on, among other things, economic and market conditions for bank holding
companies and the stock market in general, as well as changes in investor perceptions of our
company. The issuance of new shares of our common stock also may affect the market for our common
stock.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is traded on the Nasdaq Global Select Market under the symbol &#147;MBWM&#148;. The
development and maintenance of an active public trading market depends upon the existence of
willing buyers and sellers, the presence of which is beyond our control. While we are a
publicly-traded company, the volume of trading activity in our stock is still relatively limited.
Even if a more active market develops, there can be no assurance that such a market will continue,
or that our shareholders will be able to sell their shares at or above the offering price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have paid a quarterly cash dividend each quarter beginning with the first quarter of 2003.
While we expect to continue paying cash dividends, there is no assurance that we will continue to
do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our business is subject to operational risks.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We, like most financial institutions, are exposed to many types of operational risks,
including the risk of fraud by employees or outsiders, unauthorized transactions by employees or
operational errors. Operational errors may include clerical or record keeping errors or those
resulting from faulty or disabled computer or telecommunications systems. Given our volume of
transactions, certain errors may be repeated or compounded before they are discovered and
successfully corrected. Our necessary dependence upon automated systems to record and process our
transaction volume may further increase the risk that technical system flaws or employee tampering
or manipulation of those systems will result in losses that are difficult to detect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may also be subject to disruptions of our operating systems arising from events that are
wholly or partially beyond our control, including, for example, computer viruses or electrical or
telecommunications outages, which may give rise to losses in service to customers and to loss or
liability to us. We are further exposed to the risk that our external vendors may be unable to
fulfill their contractual obligations to us, or will be subject to the same risk of fraud or
operational errors by their respective employees as are we, and to the risk that our or our
vendors&#146; business continuity and data security systems prove not to be sufficiently adequate. We
also face the risk that the design of our controls and procedures prove inadequate or are
circumvented, causing delays in detection or errors in information. Although we maintain a system
of controls designed to keep operational risk at appropriate levels, there can be no assurance that
we will not suffer losses from operational risks in the future that may be material in amount.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1B. Unresolved Staff Comments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have received no written comments regarding our periodic or current reports from the staff
of the Securities and Exchange Commission that were issued 180&nbsp;days or more before the end of our
2008 fiscal year and that remain unresolved.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2. Properties.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, our bank placed into service a new four-story facility located approximately two
miles north from the center of downtown Grand Rapids. This facility serves as our headquarters and
our bank&#146;s main office, and houses the administration function, our bank&#146;s commercial lending and
review function, our bank&#146;s loan operations function, a full service branch, and portions of our
bank&#146;s retail lending and business development function. The facility consists of approximately
55,000 square feet of usable space and contains multiple drive-through lanes with ample parking.
The land and building are owned by our real estate company. The address of this facility is 310
Leonard Street NW, Grand Rapids, Michigan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our bank designed and constructed a full service branch and retail loan facility which opened
in July of 1999 in Alpine Township, a northwest suburb of Grand Rapids. The facility is one story
and has approximately 8,000 square feet of usable space. The land and building are owned by our
bank. The facility has multiple drive-through lanes and ample parking space. The address of this
facility is 4613 Alpine Avenue NW, Comstock Park, Michigan.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2001, our bank designed and constructed two facilities on a 4-acre parcel of land
located in the City of Wyoming, a southwest suburb of Grand Rapids. The land had been purchased by
our bank in 2000. The larger of the two buildings is a full service branch and deposit operations
facility which opened in September of 2001. The facility is two-stories and has approximately
25,000 square feet of usable space. The facility has multiple drive-through lanes and ample
parking space. The address of this facility is 5610 Byron Center Avenue SW, Wyoming, Michigan.
The other building is a single-story facility with approximately 11,000 square feet of usable
space. Our bank&#146;s accounting, audit, loss prevention and wire transfer functions are housed in
this building, which underwent a renovation in 2005 that almost doubled its size. The address of
this facility is 5650 Byron Center Avenue SW, Wyoming, Michigan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2002, our bank designed and constructed a full service branch which opened in December
of 2002 in the City of Kentwood, a southeast suburb of Grand Rapids. The land had been purchased
by our bank in 2001. The facility is one story and has approximately 10,000 square feet of usable
space. The facility has multiple drive-through lanes and ample parking space. The address of this
facility is 4860 Broadmoor Avenue SW, Kentwood, Michigan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2003, our bank designed and constructed a full service branch in the northeast quadrant
of the City of Grand Rapids. The land had been purchased by our bank in 2002. The facility is one
story and has approximately 3,500 square feet of usable space. The facility has multiple
drive-through lanes and ample parking space. The address of this facility is 3156 Knapp Street NE,
Grand Rapids, Michigan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2003, our bank designed and started construction of a new two-story facility located in
Holland, Michigan. This facility, which was completed during the fourth quarter of 2004, serves as
a full service banking center for the Holland area, including commercial lending, retail lending
and a full service branch. The facility, which is owned by our bank, consists of approximately
30,000 square feet of usable space and contains multiple drive-through lanes with ample parking.
The address of this facility is 880 East 16<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Street, Holland, Michigan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, our bank opened a branch facility in the City of Ann Arbor, Michigan. The
facility is one story and has approximately 10,000 square feet of usable space. The facility is
operated under a lease agreement between our bank and a third party, and serves as a full service
banking center for the Ann Arbor area, including commercial lending, retail lending and a full
service branch. There is ample parking space, but no drive-through lanes. The address of this
facility is 325 Eisenhower Parkway, Ann Arbor, Michigan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2006, our bank purchased approximately 3 acres of vacant land and designed and
initiated construction of a new three-story facility in East Lansing, Michigan. This facility was
completed during the second quarter of 2007, and serves as a full service banking center for the
greater Lansing area, including commercial lending, retail lending, and a full service branch. The
facility consists of approximately 27,000 square feet of usable space and contains multiple
drive-through lanes with ample parking. The address of this facility is 3737 Coolidge Road, East
Lansing, Michigan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2007, our bank opened a branch facility in the City of Novi, Michigan. The facility is
one story and has approximately 8,600 square feet of usable space. The facility is operated under
a lease agreement between our bank and a third party, and serves as a full service banking center
for the Oakland County area, including commercial lending, retail lending and a full service
branch. There is ample parking space, but no drive-through lanes. The address of this facility is
28350 Cabot Road, Novi, Michigan.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. Legal Proceedings.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, we may be involved in various legal proceedings that are incidental to our
business. In the opinion of management, we are not a party to any legal proceedings that are
material to our financial condition, either individually or in the aggregate.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link2 "Item&nbsp;4. Submission of Matters to a Vote of Security Holders." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. Submission of Matters to a Vote of Security Holders.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
</DIV>
<!-- link1 "PART II" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<!-- link2 "Item&nbsp;5. Market for Registrant&#146;s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;5. Market for Registrant&#146;s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is traded on the Nasdaq Global Select Market under the symbol &#147;MBWM&#148;. At
February&nbsp;10, 2009, there were 393 record holders of our common stock. In addition, we estimate
that there were approximately 4,000 beneficial owners of our common stock who own their shares
through brokers or banks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the high and low sales prices for our common stock as reported by
the Nasdaq Global Select Market for the periods indicated and the quarterly cash dividends paid by
us during those periods. Applicable prices have been adjusted for the 5% stock dividend paid on
May&nbsp;4, 2007.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Dividend</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2008</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">16.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2007</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.14</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of our common stock are entitled to receive dividends that the Board of Directors may
declare from time to time. We may only pay dividends out of funds that are legally available for
that purpose. We are a holding company and substantially all of our assets are held by our
subsidiaries. Our ability to pay dividends to our shareholders depends primarily on our bank&#146;s
ability to pay dividends to us. Dividend payments and extensions of credit to us from our bank are
subject to legal and regulatory limitations, generally based on capital levels and current and
retained earnings, imposed by law and regulatory agencies with authority over our bank. The
ability of our bank to pay dividends is also subject to its profitability, financial condition,
capital expenditures and other cash flow requirements. In addition, under the terms of our
subordinated debentures, we would be precluded from paying dividends on our common stock if an
event of default has occurred and is continuing under the subordinated debentures, or if we
exercised our right to defer payments of interest on the subordinated debentures, until the
deferral ended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;8, 2009, we declared a $0.04 per share cash dividend on our common stock, payable
on March&nbsp;10, 2009 to record holders as of February&nbsp;10, 2009. We currently expect to continue to
pay a quarterly cash dividend, although there can be no assurance that we will continue to do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Issuer Purchases of Equity Securities
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We did not purchase any shares of our common stock during the fourth quarter of 2008.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->17.<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Shareholder Return Performance Graph
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is a line graph comparing the yearly percentage change in the cumulative total
shareholder return on our common stock (based on the last reported sales price of the respective
year) with the cumulative total return of the Nasdaq Composite Index and the SNL Nasdaq Bank Index
from December&nbsp;31, 2003 through December&nbsp;31, 2008. The following is based on an investment of $100
on December&nbsp;31, 2003 in our common stock, the Nasdaq Composite Index and the SNL Nasdaq Bank Index,
with dividends reinvested where applicable.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="k47547k4754701.gif" alt="(PERFORMANCE GRAPH)">
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23" style="border-bottom: 1px solid #000000"><B><I>Period Ending</I></B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B><I>Index</I></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>12/31/03</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>12/31/04</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>12/31/05</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>12/31/06</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>12/31/07</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>12/31/08</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mercantile Bank Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NASDAQ Composite</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78.72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SNL Bank NASDAQ</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71.13</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<!-- link2 "Item&nbsp;6. Selected Financial Data." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6. Selected Financial Data.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Selected Financial Data on page F-3 in this Annual Report is incorporated here by
reference.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->18.<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- link2 "Item&nbsp;7. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operation." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;7. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operation.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management&#146;s Discussion and Analysis included in this Annual Report is incorporated here by
reference.
</DIV>
<!-- link2 "Item&nbsp;7A. Quantitative and Qualitative Disclosures About Market Risk." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;7A. Quantitative and Qualitative Disclosures About Market Risk.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information under the heading &#147;Market Risk Analysis&#148; included in this Annual Report is
incorporated here by reference.
</DIV>
<!-- link2 "Item&nbsp;8. Financial Statements and Supplementary Data." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;8. Financial Statements and Supplementary Data.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Consolidated Financial Statements, Notes to Consolidated Financial Statements and the
Reports of Independent Registered Public Accounting Firm included in this Annual Report are
incorporated here by reference.
</DIV>
<!-- link2 "Item&nbsp;9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
</DIV>
<!-- link2 "Item&nbsp;9A. Controls and Procedures." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9A. Controls and Procedures.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2008, an evaluation was performed under the supervision of and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and procedures. Based
on that evaluation, our management, including our Chief Executive Officer and Chief Financial
Officer, concluded that our disclosure controls and procedures were effective as of December&nbsp;31,
2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There have been no significant changes in our internal controls over financial reporting
during the quarter ended December&nbsp;31, 2008, that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rules&nbsp;13a-15(f). There are inherent
limitations in the effectiveness of any system of internal control. Accordingly, even an effective
system of internal control can provide only reasonable assurance with respect to financial
statement preparation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of
our internal control over financial reporting as of December&nbsp;31, 2008. This evaluation was based
on criteria for effective internal control over financial reporting described in <I>Internal Control
&#151; Integrated Framework </I>issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on our evaluation under the
framework in <I>Internal Control &#151; Integrated Framework</I>, our management concluded that our internal control over financial reporting was
effective as of December&nbsp;31, 2008. Refer to page F-32 for management&#146;s report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our independent registered public accounting firm has issued an audit report on our internal
control over financial reporting which is included in this Annual Report.
</DIV>
<!-- link2 "Item&nbsp;9B. Other Information." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9B. Other Information.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->19.<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<!-- link1 "PART III" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>

<!-- link2 "Item&nbsp;10. Directors, Executive Officers and Corporate Governance." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;10. Directors, Executive Officers and Corporate Governance.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information presented under the captions &#147;Election of Directors,&#148; &#147;Executive Officers,&#148;
&#147;Section&nbsp;16(a) Beneficial Ownership Reporting Compliance&#148; and &#147;Corporate Governance &#151; Code of
Ethics&#148; in the definitive Proxy Statement of Mercantile for our April&nbsp;23, 2009 Annual Meeting of
Shareholders (the &#147;Proxy Statement&#148;), a copy of which will be filed with the Securities and
Exchange Commission before the meeting date, is incorporated here by reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a separately-designated standing audit committee established in accordance with
Section&nbsp;3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the Audit Committee
consist of Betty S. Burton, David M. Cassard, David M. Hecht, Calvin D. Murdock, Merle J. Prins and
Timothy O. Schad. The Board of Directors has determined that Messrs.&nbsp;Cassard, Murdock and Schad,
members of the Audit Committee, are qualified as audit committee financial experts, as that term is
defined in the rules of the Securities and Exchange Commission. Messrs.&nbsp;Cassard, Murdock and Schad
are independent, as independence for audit committee members is defined in the Nasdaq listing
standards and the rules of the Securities and Exchange Commission.
</DIV>
<!-- link2 "Item&nbsp;11. Executive Compensation." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;11. Executive Compensation.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information presented under the captions &#147;Executive Compensation,&#148; &#147;Corporate Governance
&#151; Compensation Committee Interlocks and Insider Participation&#148; and &#147;Compensation Committee Report&#148;
in the Proxy Statement is incorporated here by reference.
</DIV>
<!-- link2 "Item&nbsp;12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information presented under the caption &#147;Stock Ownership of Certain Beneficial Owners and
Management&#148; in the Proxy Statement is incorporated here by reference.
</DIV>

<P align="right" style="font-size: 10pt"><!-- Folio -->20.<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Equity Compensation Plan Information
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes information, as of December&nbsp;31, 2008, relating to compensation
plans under which equity securities are authorized for issuance.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of securities</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">remaining available for</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">future issuance under</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of securities to</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">equity compensation</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">be issued upon exercise</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">exercise price of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">plans (excluding</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">of outstanding options,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">outstanding options,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">securities reflected in</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Plan Category</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">warrants and rights</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">warrants and rights</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">column (a))</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(a)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(b)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(c)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans approved by
security holders
(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">396,000 </TD>
    <TD nowrap>(2)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans not approved
by security holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">396,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>These plans are Mercantile&#146;s 1997 Employee Stock Option Plan, 2000 Employee Stock Option Plan,
2004 Employee Stock Option Plan, Independent Director Stock Option Plan and the Stock Incentive
Plan of 2006.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>These securities are available under the Stock Incentive Plan of 2006. Incentive awards may
include, but are not limited to, stock options, restricted stock, stock appreciation rights and
stock awards.</TD>
</TR>

</TABLE>


<!-- link2 "Item&nbsp;13. Certain Relationships and Related Transactions, and Director Independence." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;13. Certain Relationships and Related Transactions, and Director Independence.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information presented under the captions &#147;Transactions with Related Persons&#148; and
&#147;Corporate Governance &#151; Director Independence&#148; in the Proxy Statement is incorporated here by
reference.
</DIV>
<!-- link2 "Item&nbsp;14. Principal Accountant Fees and Services." -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;14. Principal Accountant Fees and Services.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information presented under the caption &#147;Principal Accountant Fees and Services&#148; in the
Proxy Statement is incorporated here by reference.
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->21.<!-- /Folio -->
</DIV>




<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- link1 "PART IV" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART IV</B>
</DIV>

<!-- link2 "Item&nbsp;15. Exhibits and Financial Statement Schedules" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;15. Exhibits and Financial Statement Schedules</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a) (1)&nbsp;Financial Statements. The following financial statements and reports of independent
registered public accounting firms of Mercantile Bank Corporation and its subsidiaries are filed as
part of this report:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Report of Independent Registered Public Accounting Firm dated March&nbsp;11, 2009 &#151; BDO
Seidman, LLP</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Report of Independent Registered Public Accounting Firm dated February&nbsp;20, 2007 &#151; Crowe
Horwath LLP</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Consolidated Balance Sheets -&#151; December&nbsp;31, 2008 and 2007</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Consolidated Statements of Income for each of the three years in the period ended December
31, 2008</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Consolidated Statements of Changes in Shareholders&#146; Equity for each of the three years in
the period ended December&nbsp;31, 2008</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Consolidated Statements of Cash Flows for each of the three years in the period ended
December&nbsp;31, 2008</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notes to Consolidated Financial Statements</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The consolidated financial statements, the notes to the consolidated financial statements,
and the reports of independent registered public accounting firm listed above are
incorporated by reference in Item&nbsp;8 of this report.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial Statement Schedules</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Not applicable</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Exhibits:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">EXHIBIT NO.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT DESCRIPTION</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Our Articles of Incorporation are incorporated by reference to
exhibit 3.1 of our Form&nbsp;10-Q for the quarter ended June&nbsp;30,
2008</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Our Amended and Restated Bylaws dated as of January&nbsp;16, 2003
are incorporated by reference to exhibit 3.2 of our
Registration Statement on Form&nbsp;S-3 (Commission File No.
333-103376) that became effective on February&nbsp;21, 2003</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Our 1997 Employee Stock Option Plan is incorporated by
reference to exhibit 10.1 of our Registration Statement on Form
SB-2 (Commission File No.&nbsp;333-33081) that became effective on
October&nbsp;23, 1997 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Our 2000 Employee Stock Option Plan is incorporated by
reference to exhibit 10.14 of our Form&nbsp;10-K for the year ended
December&nbsp;31, 2000 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Our 2004 Employee Stock Option Plan is incorporated by
reference to exhibit 10.1 of our Form&nbsp;10-Q for the quarter
ended September&nbsp;30, 2004 *</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->22.<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">EXHIBIT NO.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT DESCRIPTION</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Stock Option Agreement for options under the 2004
Employee Stock Option Plan is incorporated by reference to
exhibit 10.2 of our Form&nbsp;10-Q for the quarter ended September
30, 2004 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Our Independent Director Stock Option Plan is incorporated by
reference to exhibit 10.26 of our Form&nbsp;10-K for the year ended
December&nbsp;31, 2002 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Stock Option Agreement for options under the
Independent Director Stock Option Plan is incorporated by
reference to exhibit 10.1 of our Form&nbsp;8-K filed October&nbsp;22,
2004 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mercantile Bank of Michigan Amended and Restated Deferred
Compensation Plan for Members of the Board of Directors dated
June&nbsp;29, 2006 is incorporated by reference to exhibit 10.9 of
our Form&nbsp;10-K for the year ended December&nbsp;31, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment dated October&nbsp;25, 2007 to the Mercantile Bank
of Michigan Amended and Restated Deferred Compensation Plan for
Members of the Board of Directors dated June&nbsp;29, 2006 is
incorporated by reference to exhibit 10.10 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment dated October&nbsp;23, 2008 to the Mercantile Bank
of Michigan Amended and Restated Deferred Compensation Plan for
Members of the Board of Directors dated June&nbsp;29, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement between Fiserv Solutions, Inc. and our bank dated
September&nbsp;10, 1997, is incorporated by reference to exhibit
10.3 of our Registration Statement on Form&nbsp;SB-2 (Commission
File No.&nbsp;333-33081) that became effective on October&nbsp;23, 1997</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Extension Agreement of Data Processing Contract between Fiserv
Solutions, Inc. and our bank dated May&nbsp;12, 2000 extending the
agreement between Fiserv Solutions, Inc. and our bank dated
September&nbsp;10, 1997, is incorporated by reference to exhibit
10.15 of our Form&nbsp;10-K for the year ended December&nbsp;31, 2000</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Extension Agreement of Data Processing Contract between Fiserv
Solutions, Inc. and our bank dated November&nbsp;21, 2002 extending
the agreement between Fiserv Solutions, Inc. and our bank dated
September&nbsp;10, 1997, is incorporated by reference to exhibit
10.5 of our Form&nbsp;10-K for the year ended December&nbsp;31, 2002</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Extension Agreement of Data Processing Contract between Fiserv
Solutions, Inc. and our bank dated December&nbsp;20, 2006 extending
the agreements between Fiserv Solutions, Inc. and our bank
dated September&nbsp;10, 1997 and November&nbsp;21, 2002 is incorporated
by reference to exhibit 10.14 of our Form&nbsp;10-K for the year
ended December&nbsp;31, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Employment Agreement dated as of October
18, 2001, among the company, our bank and Gerald R. Johnson,
Jr., is incorporated by reference to exhibit 10.21 of our Form
10-K for the year ended December&nbsp;31, 2001 *</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->23.<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">EXHIBIT NO.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT DESCRIPTION</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.15
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Employment Agreement dated as of October
18, 2001, among the company, our bank and Michael H. Price, is
incorporated by reference to exhibit 10.22 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2001 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated as of October&nbsp;18, 2001, among the
company, our bank and Robert B. Kaminski, Jr., is incorporated
by reference to exhibit 10.23 of our Form&nbsp;10-K for the year
ended December&nbsp;31, 2001 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.17
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated as of October&nbsp;18, 2001, among the
company, our bank and Charles E. Christmas, is incorporated by
reference to exhibit 10.23 of our Form&nbsp;10-K for the year ended
December&nbsp;31, 2001 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Employment Agreement dated as of October&nbsp;17, 2002,
among the company, our bank and Gerald R. Johnson, Jr., is
incorporated by reference to exhibit 10.21 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2002 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.19
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Employment Agreement dated as of October&nbsp;17, 2002,
among the company, our bank and Michael H. Price, is
incorporated by reference to exhibit 10.22 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2002 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.20
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Employment Agreement dated as of October&nbsp;17, 2002,
among the company, our bank and Robert B. Kaminski, Jr., is
incorporated by reference to exhibit 10.23 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2002 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Employment Agreement dated as of October&nbsp;17, 2002,
among the company, our bank and Charles E. Christmas, is
incorporated by reference to exhibit 10.24 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2002 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.22
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Employment Agreement dated as of October&nbsp;28, 2004,
among the company, our bank and Robert B. Kaminski, Jr., is
incorporated by reference to exhibit 10.21 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2004 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.23
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Junior Subordinated Indenture between us and Wilmington Trust
Company dated September&nbsp;16, 2004 providing for the issuance of
the Series&nbsp;A and Series&nbsp;B Floating Rate Junior Subordinated
Notes due 2034 is incorporated by reference to exhibit 10.1 of
our Form&nbsp;8-K filed December&nbsp;15, 2004</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Trust Agreement dated September&nbsp;16, 2004
for Mercantile Bank Capital Trust I is incorporated by
reference to exhibit 10.2 of our Form&nbsp;8-K filed December&nbsp;15,
2004</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.25
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Placement Agreement between us, Mercantile Bank Capital Trust
I, and SunTrust Capital Markets, Inc. dated September&nbsp;16, 2004
is incorporated by reference to exhibit 10.3 of our Form&nbsp;8-K
filed December&nbsp;15, 2004</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.26
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Guarantee Agreement dated September&nbsp;16, 2004 between Mercantile
as Guarantor and Wilmington Trust Company as Guarantee Trustee
is incorporated by reference to exhibit 10.4 of our Form&nbsp;8-K
filed December&nbsp;15, 2004</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.27
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Agreement Amending Stock Option Agreement, dated
November&nbsp;17, 2005 issued under our 2004 Employee Stock Option
Plan, is incorporated by reference to exhibit 10.1 of our Form
8-K filed December&nbsp;14, 2005 *</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->24.<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">EXHIBIT NO.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT DESCRIPTION</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.28
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment to Employment Agreement dated as of November
17, 2005, among the company, our bank and Gerald R. Johnson,
Jr. is incorporated by reference to exhibit 10.28 of our Form
10-K for the year ended December&nbsp;31, 2005 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.29
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment to Employment Agreement dated as of November
17, 2005, among the company, our bank and Michael H. Price is
incorporated by reference to exhibit 10.29 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2005 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.30
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Amendment to Employment Agreement dated as of November
17, 2005, among the company, our bank and Robert B. Kaminski,
Jr. is incorporated by reference to exhibit 10.30 of our Form
10-K for the year ended December&nbsp;31, 2005 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.31
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment to Employment Agreement dated as of November
17, 2005, among the company, our bank and Charles E. Christmas
is incorporated by reference to exhibit 10.31 of our Form&nbsp;10-K
for the year ended December&nbsp;31, 2005 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.32
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Mercantile Bank of Michigan Amended and Restated
Executive Deferred Compensation Agreement dated November&nbsp;18,
2006, that has been entered into between our bank and each of
Gerald R. Johnson, Jr., Michael H. Price, Robert B. Kaminski,
Jr., Charles E. Christmas, and certain other officers of our
bank is incorporated by reference to exhibit 10.34 of our Form
10-K for the year ended December&nbsp;31, 2007 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.33
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of First Amendment to the Mercantile Bank of Michigan
Executive Deferred Compensation Agreement dated November&nbsp;18,
2006, that has been entered into between our bank and each of
Gerald R. Johnson, Jr., Michael H. Price, Robert B. Kaminski,
Jr., Charles E. Christmas, and certain other officers of our
bank, dated October&nbsp;25, 2007 is incorporated by reference to
exhibit 10.35 of our Form&nbsp;10-K for the year ended December&nbsp;31,
2007 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.34
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Second Amendment to the Mercantile Bank of Michigan
Executive Deferred Compensation Agreement date November&nbsp;18,
2006, that has been entered into between our bank and each of
Michael H. Price, Robert B. Kaminski, Charles E. Christmas, and
certain other officers of our bank, dated October&nbsp;23, 2008 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.35
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Mercantile Bank of Michigan Split Dollar Agreement that
has been entered into between our bank and each of Gerald R.
Johnson, Jr., Michael H. Price, Robert B. Kaminski, Jr.,
Charles E. Christmas, and certain other officers of our bank is
incorporated by reference to exhibit 10.33 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2005 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.36
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director Fee Summary *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.37
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease Agreement between our bank and The Conlin Company dated
July&nbsp;12, 2005 for our Ann Arbor, Michigan office is
incorporated by reference to exhibit 10.36 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2005</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.38
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stock Incentive Plan of 2006 is incorporated by reference to
Appendix&nbsp;A of our proxy statement for our April&nbsp;27, 2006 annual
meeting of shareholders that was filed with the Securities and
Exchange Commission *</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->25.<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">EXHIBIT NO.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT DESCRIPTION</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.39
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment and Restatement of Stock Incentive Plan of 2006 dated
November&nbsp;18, 2008 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.40
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Notice of Grant of Incentive Stock Option and Stock
Option Agreement for incentive stock options granted in 2006
under our Stock Incentive Plan of 2006 is incorporated by
reference to exhibit 10.1 of our Form&nbsp;8-K filed November&nbsp;22,
2006 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.41
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Notice of Grant of Incentive Stock Option and Stock
Option Agreement for incentive stock options granted after 2006
under our Stock Incentive Plan of 2006 is incorporated by
reference to exhibit 10.41 of our Form&nbsp;10-K for the year ended
December&nbsp;31, 2007 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.42
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Restricted Stock Award Agreement Notification of Award
and Terms and Conditions of Award for restricted stock granted
in 2006 under our Stock Incentive Plan of 2006 is incorporated
by reference to exhibit 10.2 of our Form&nbsp;8-K filed November&nbsp;22,
2006 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.43
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Restricted Stock Award Agreement Notification of Award
and Terms and Conditions of Award for restricted stock granted
after 2006 under our Stock Incentive Plan of 2006 is
incorporated by reference to exhibit 10.43 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2007 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.44
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Officer Bonus Plan for 2007 is incorporated by
reference to exhibit 10.1 of our Form&nbsp;8-K filed January&nbsp;29,
2007 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.45
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retirement Agreement by and among Mercantile Bank Corporation,
Mercantile Bank of Michigan and Gerald R. Johnson, Jr. is
incorporated by reference to exhibit 10.1 of our Form&nbsp;8-K filed
May&nbsp;25, 2007 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.46
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Additional Release of Claims Pursuant to Retirement Agreement
Dated May&nbsp;24, 2007 by and among Mercantile Bank Corporation,
Mercantile Bank of Michigan and Gerald R. Johnson, Jr. is
incorporated by reference to exhibit 10.1 of our Form&nbsp;10-Q for
the quarter ended September&nbsp;30, 2007 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.47
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mercantile Bank Corporation Employee Stock Purchase Plan of 2002</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.48
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease Agreement between our bank and CD Partners LLC dated
October&nbsp;2, 2007 for our Oakland County, Michigan office is
incorporated by reference to exhibit 10.47 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries of the company</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of BDO Seidman, LLP</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Crowe Horwath LLP</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rule&nbsp;13a-14(a) Certifications</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;1350 Chief Executive Officer Certification</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;1350 Chief Financial Officer Certification</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->26.<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Management contract or compensatory plan</TD>
</TR>

</TABLE>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial Statements Not Included In Annual Report</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Not applicable</TD>
</TR>

</TABLE>
</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio -->27.<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MERCANTILE BANK CORPORATION</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>FINANCIAL INFORMATION</B><BR>
December&nbsp;31, 2008 and 2007

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">FINANCIAL INFORMATION<BR>
December&nbsp;31, 2008 and 2007

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CONTENTS

</DIV>
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#300">SELECTED FINANCIAL DATA </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#301">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#302">REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#303">REPORT BY MERCANTILE BANK CORPORATION&#146;S MANAGEMENT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CONSOLIDATED FINANCIAL STATEMENTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#305">CONSOLIDATED BALANCE SHEETS </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#306">CONSOLIDATED STATEMENTS OF INCOME </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#307">CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS&#146; EQUITY </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#308">CONSOLIDATED STATEMENTS OF CASH FLOWS </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#309">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-39</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="300"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SELECTED FINANCIAL DATA</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18">(Dollars in thousands except per share data)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Consolidated Results of Operations:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">121,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">144,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">137,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">102,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">69,022</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,595</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,427</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,674</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noninterest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,302</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noninterest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,198</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;before income tax expense (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,835</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,857</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,876</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,136</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4,959</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,721</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Consolidated Balance Sheet Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,208,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,121,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,067,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,838,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,536,119</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,811</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">211,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">181,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152,965</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loans and leases, net of deferred fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,856,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,799,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,745,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,561,812</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,317,124</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,819</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank owned life insurance policies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,599,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,591,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,646,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,419,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,159,181</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Securities sold under agreements to repurchase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,317</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Federal Home Loan Bank advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subordinated debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,990</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141,617</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Consolidated Financial Ratios:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Return on average assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.23</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.43</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.01</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.05</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.99</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Return on average shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.87</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.10</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12.19</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12.05</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.16</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average shareholders&#146; equity to average assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.01</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.44</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.31</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.73</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">9.79</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonperforming loans and leases to total loans and leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.66</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.66</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.49</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.26</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.22</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for loan and lease losses to total loans and leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.46</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.43</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.23</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.31</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.35</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tier 1 leverage capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">9.17</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">9.97</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.04</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.45</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.53</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tier 1 leverage risk-based capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">9.68</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.14</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.37</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.82</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.82</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total risk-based capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.93</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.39</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.45</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">13.03</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Per Share Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Book value at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.78</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend payout ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">52.16</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20.34</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">17.79</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18.60</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-3<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="301"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>FORWARD-LOOKING STATEMENTS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following discussion and other portions of this Annual Report contain forward-looking
statements that are based on management&#146;s beliefs, assumptions, current expectations, estimates and
projections about the financial services industry, the economy, and about our company. Words such
as &#147;anticipates,&#148; &#147;believes,&#148; &#147;estimates,&#148; &#147;expects,&#148; &#147;forecasts,&#148; &#147;intends,&#148; &#147;is likely,&#148; &#147;plans,&#148;
&#147;projects,&#148; and variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions (&#147;Future Factors&#148;) that are difficult to predict with
regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and
outcomes may materially differ from what may be expressed or forecasted in such forward-looking
statements. We undertake no obligation to update, amend, or clarify forward-looking statements,
whether as a result of new information, future events (whether anticipated or unanticipated), or
otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Future Factors include changes in interest rates and interest rate relationships; demand for
products and services; the degree of competition by traditional and non-traditional competitors;
changes in banking regulation; changes in tax laws; changes in prices, levies, and assessments; the
impact of technological advances; governmental and regulatory policy changes; the outcomes of
contingencies; trends in customer behavior as well as their ability to repay loans; changes in
local real estate values; changes in the national and local economies; and other risk factors
described in Item&nbsp;1A of this Annual Report. These are representative of the Future Factors that
could cause a difference between an ultimate actual outcome and a preceding forward-looking
statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CRITICAL ACCOUNTING POLICIES AND ESTIMATES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations is based on
Mercantile Bank Corporation&#146;s consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses. Material estimates that are
particularly susceptible to significant change in the near term relate to the determination of the
allowance for loan and lease losses and income tax accounting, and actual results could differ from
those estimates. Management has reviewed the analyses with the Audit Committee of our Board of
Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Allowance For Loan and Lease Losses</U>: The allowance for loan and lease losses (&#147;allowance&#148;)
is maintained at a level we believe is adequate to absorb probable incurred losses identified and
inherent in the loan and lease portfolio. Our evaluation of the adequacy of the allowance is an
estimate based on past loan loss experience, the nature and volume of the loan and lease portfolio,
information about specific borrower situations and estimated collateral values and assessments of
the impact of current and anticipated economic conditions on the loan and lease portfolio.
Allocations of the allowance may be made for specific loans or leases, but the entire allowance is
available for any loan or lease that, in management&#146;s judgment, should be charged-off. Loan and
lease losses are charged against the allowance when management believes the uncollectibility of a
loan or lease is likely. The balance of the allowance represents management&#146;s best estimate, but
significant downturns in circumstances relating to loan and lease quality or economic conditions
could result in a requirement for an increased allowance in the future. Likewise, an upturn in
loan and lease quality or improved economic conditions may result in a decline in the required
allowance in the future. In either instance, unanticipated changes could have a significant impact
on operating earnings.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-4<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The allowance is increased through a provision charged to operating expense. Uncollectible loans
and leases are charged-off through the allowance. Recoveries of loans and leases previously
charged-off are added to the allowance. A loan or lease is considered impaired when it is probable
that contractual interest and principal payments will not be collected either for the amounts or by
the dates as scheduled in the loan or lease agreement. Impairment is evaluated in aggregate for
smaller-balance loans of similar nature such as residential mortgage, consumer and credit card
loans, and on an individual loan or lease basis for other loans. If a loan or lease is impaired, a
portion of the allowance is allocated so that the loan or lease is reported, net, at the present
fair value of estimated future cash flows using the loan&#146;s or lease&#146;s existing interest rate or at
the fair value of collateral if repayment is expected solely from the collateral. Loans and leases
are evaluated for impairment when payments are delayed, typically 30&nbsp;days or more, or when serious
deficiencies are identified within the credit relationship. Our policy for recognizing income on
impaired loans is to accrue interest unless a loan is placed on nonaccrual status. We put loans
into nonaccrual status when the full collection of principal and interest is not expected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Income Tax Accounting</U>: Income tax liabilities or assets are established for the amount of
taxes payable or refundable for the current year. Deferred income tax liabilities and assets are
also established for the future tax consequences of events that have been recognized in our
financial statements or tax returns. A deferred income tax liability or asset is recognized for
the estimated future tax effects attributable to temporary differences that can be carried forward
(used)&nbsp;in future years. The valuation of current and deferred income tax liabilities and assets is
considered critical as it requires us to make estimates based on provisions of the enacted tax
laws. The assessment of tax liabilities and assets involves the use of estimates, assumptions,
interpretations and judgments concerning accounting pronouncements, federal and state tax codes and
the extent of future taxable income. There can be no assurance that future events, such as court
decisions, positions of federal and state taxing authorities, and the extent of future taxable
income, will not differ from our current assessment, the impact of which could be significant to
the consolidated results of operations and reported earnings. We believe our tax liabilities and
assets are adequate and are properly recorded in the consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>INTRODUCTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This Management&#146;s Discussion and Analysis should be read in conjunction with the consolidated
financial statements contained in this Annual Report. This discussion provides information about
the consolidated financial condition and results of operations of Mercantile Bank Corporation and
its consolidated subsidiary, Mercantile Bank of Michigan (&#147;our bank&#148;), and of Mercantile Bank
Mortgage Company, LLC (&#147;our mortgage company&#148;), Mercantile Bank Real Estate Co., L.L.C. (&#147;our real
estate company&#148;) and Mercantile Insurance Center, Inc. (&#147;our insurance company&#148;), which are
subsidiaries of our bank. Unless the text clearly suggests otherwise, references to &#147;us,&#148; &#147;we,&#148;
&#147;our,&#148; or &#147;the company&#148; include Mercantile Bank Corporation and its wholly-owned subsidiaries
referred to above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We were incorporated on July&nbsp;15, 1997 as a bank holding company to establish and own our bank. Our
bank, after receiving all necessary regulatory approvals, began operations on December&nbsp;15, 1997.
Our bank has a strong commitment to community banking and offers a wide range of financial products
and services, primarily to small- to medium-sized businesses, as well as individuals. Our bank&#146;s
lending strategy focuses on commercial lending, and, to a lesser extent, residential mortgage and
consumer lending. Our bank also offers a broad array of deposit products, including checking,
savings, money market, and certificates of deposit, as well as security repurchase agreements. Our
primary markets are the Grand Rapids, Holland, Lansing, Ann Arbor and Oakland County areas. Our
bank utilizes certificates of deposit from customers located outside of the primary market area to
assist in funding the historically strong asset growth our bank has experienced since inception.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We formed a business trust, Mercantile Bank Capital Trust I (&#147;the trust&#148;), in 2004 to issue trust
preferred securities. We issued subordinated debentures to the trust in return for the proceeds
raised from the issuance of the trust preferred securities. In accordance with FASB Interpretation
No.&nbsp;46, the trust is not consolidated, but instead we report the subordinated debentures issued to
the trust as a liability.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our mortgage company&#146;s predecessor, Mercantile Bank Mortgage Company, was formed to increase the
profitability and efficiency of our mortgage loan operations. Mercantile Bank Mortgage Company
initiated
business on October&nbsp;24, 2000 from our bank&#146;s contribution of most of its residential mortgage loan
portfolio and participation interests in certain commercial mortgage loans. On the same date, our
bank had also transferred its residential mortgage origination function to Mercantile Bank Mortgage
Company. On January&nbsp;1, 2004, Mercantile Bank Mortgage Company was reorganized as Mercantile Bank
Mortgage Company, LLC, a limited liability company. Mortgage loans originated and held by our
mortgage company are serviced by our bank pursuant to a servicing agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our insurance company acquired, at nominal cost, an existing shelf insurance agency effective April
15, 2002. An Agency and Institution Agreement was entered into among our insurance company, our
bank and Hub International for the purpose of providing programs of mass marketed personal lines of
insurance. Insurance product offerings include private passenger automobile, homeowners, personal
inland marine, boat owners, recreational vehicle, dwelling fire, umbrella policies, small business
and life insurance products, all of which are provided by and written through companies that have
appointed Hub International as their agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our real estate company was organized on July&nbsp;21, 2003, principally to develop, construct and own
our facility in downtown Grand Rapids which serves as our bank&#146;s main office and Mercantile Bank
Corporation&#146;s headquarters. Construction was completed during the second quarter of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>FINANCIAL CONDITION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Primarily reflecting weakening and relatively poor economic conditions within our markets during
2008, our asset growth during 2008 was lower than historical levels. Assets increased from
$2,121.4&nbsp;million on December&nbsp;31, 2007 to $2,208.0&nbsp;million on December&nbsp;31, 2008. This represents an
increase in total assets of $86.6&nbsp;million, or 4.1%. Our asset growth during 2007 was also lower
than historical levels due to competitive commercial loan pricing and underwriting environments,
combined with weakening economic conditions. Asset growth averaged $288.0&nbsp;million per year during
the period of 2004 through 2006. The increase in total assets during 2008 was primarily comprised
of a $55.7&nbsp;million increase in net loans and leases and a $31.1&nbsp;million increase in securities.
The increase in assets was primarily funded by a $90.0&nbsp;million increase in Federal Home Loan Bank
(&#147;FHLB&#148;) advances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Earning Assets</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Average earning assets equaled 95.4% of average total assets during 2008, compared to 95.0% during
2007, with our asset composition remaining relatively unchanged. The loan and lease portfolio
continued to comprise a majority of earning assets, followed by securities and federal funds sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our loan and lease portfolio, which equaled 88.9% of average earnings assets during 2008, is
primarily comprised of commercial loans and leases. Commercial loans and leases increased by $51.1
million during 2008, and at December&nbsp;31, 2008, totaled $1,710.3&nbsp;million, or 92.1% of the total loan
and lease portfolio. As was the case during 2007, the growth in our commercial loan and lease
portfolio slowed during 2008. The lower level of growth during 2008 primarily reflected the
weakening and relatively poor economic conditions within our markets, compared to 2007 when our
loan growth was slowed by competitive pricing and underwriting environments and weakening economic
conditions within our markets. The competitive pressures, from financial institutions and other
entities such as private equity funds, negatively impacted the volume of loans we booked and
accelerated the level of loan payoffs. We believe that adhering to prudent underwriting practices,
rather than focusing on loan growth, outweighs the resulting lower level of interest income and net
income due to the smaller balance of our commercial loan and lease portfolio.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The commercial loan and lease portfolio represents loans to businesses generally located within our
market areas. Approximately 70% of the commercial loan and lease portfolio is primarily secured by
real estate properties, with
the remaining generally secured by other business assets such as accounts receivable, inventory,
and equipment. The continued significant concentration of the loan and lease portfolio in
commercial loans and leases and the historical strong growth of this portion of our lending
business are consistent with our stated strategy of focusing a substantial amount of our efforts on
&#147;wholesale&#148; banking. Corporate and business lending continues to be an area of expertise for our
senior management team, and our commercial lenders have extensive commercial lending experience,
with most having at least ten years&#146; experience. Of each of the loan categories that we originate,
commercial loans and leases are most efficiently originated and managed, thus limiting overhead
costs by necessitating the attention of fewer employees. Our commercial lending business generates
the largest portion of local deposits, and is our primary source of demand deposits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the latter part of 2007, our loan review function completed a real estate loan project that
expanded our traditional loan coding paradigm to provide increased specificity in the
categorization of loans secured by real estate. The following table summarizes our loans secured
by real estate, excluding residential mortgage loans representing permanent financing to owner
occupied dwellings and home equity lines of credit, as of December&nbsp;31, 2008:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Residential &#151; Vacant Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21,374,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Residential &#151; Land Development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,055,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Residential &#151; Construction</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,839,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial &#151; Vacant Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,269,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial &#151; Land Development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,629,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial &#151; Construction NonOwner Occupied</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,464,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial &#151; Construction Owner Occupied</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,344,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial &#151; NonOwner Occupied</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">558,360,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial &#151; Owner Occupied</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">370,099,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,186,433,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Residential mortgage and consumer loans increased in aggregate $5.9&nbsp;million during 2008, and at
December&nbsp;31, 2008, totaled $146.6&nbsp;million, or 7.9% of the total loan and lease portfolio. Although
residential mortgage loan and consumer loan portfolios may increase in future periods, we expect
the commercial sector of the lending efforts and resultant assets to remain the dominant loan
portfolio category given our wholesale banking strategy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table presents total loans outstanding as of December&nbsp;31, 2008, according to
scheduled repayments of principal on fixed rate loans and repricing frequency on variable rate
loans. Floating rate loans that are currently at interest rate ceilings or interest rate floors
are treated as fixed rate loans and are reflected using maturity date and not repricing frequency.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">0-1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">1-5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">After 5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction and land development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">183,749,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">79,285,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">358,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">263,392,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Real estate &#151; secured by 1-4 family
properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,079,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,214,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,483,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,776,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Real estate &#151; secured by multi-family
properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,107,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,784,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,474,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,365,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Real estate &#151; secured by
nonresidential properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">360,096,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">477,023,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,231,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">881,350,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">368,926,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,709,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,566,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">516,201,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,842,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,985,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consumer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,447,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,808,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">591,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,846,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,015,547,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">764,665,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">76,703,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,856,915,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed rate loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">318,977,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">764,422,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">63,223,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,146,622,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Floating rate loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">696,570,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,480,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">710,293,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,015,547,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">764,665,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">76,703,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,856,915,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our credit policies establish guidelines to manage credit risk and asset quality. These guidelines
include loan review and early identification of problem loans and leases to provide effective loan
and lease portfolio administration. The credit policies and procedures are meant to minimize the
risk and uncertainties inherent in lending. In following these policies and procedures, we must
rely on estimates, appraisals and evaluations of loans
and leases and the possibility that changes in these could occur quickly because of changing
economic conditions. Identified problem loans and leases, which exhibit characteristics (financial
or otherwise) that could cause the loans and leases to become nonperforming or require
restructuring in the future, are included on the internal &#147;watch list.&#148; Senior management and the
Board of Directors review this list regularly.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The level of net loan and lease charge-offs and nonperforming assets has increased during the past
two years. Although we were never directly involved in the underwriting of or the investing in
subprime residential real estate loans, the apparent substantial and rapid collapse of this line of
business during 2007 and 2008 throughout the United States had a significant negative impact on the
residential real estate development lending portion of our business. The resulting decline in real
estate prices and slowdown in sales stretched the cash flow of our local developers and eroded the
value of our underlying collateral, causing elevated levels of nonperforming assets and net loan
and lease charge-offs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2007, nonperforming assets totaled $35.7&nbsp;million, or 1.68% of total assets, an
increase from the $9.6&nbsp;million, or 0.46% of total assets, as of December&nbsp;31, 2006. Nonperforming
loans and leases totaled $29.8&nbsp;million and foreclosed properties/repossessed assets equaled $5.9
million at year-end 2007, compared to $8.6&nbsp;million and $1.0&nbsp;million, respectively, at year-end
2006. As of December&nbsp;31, 2007, nonperforming loans secured by real estate, combined with all
foreclosed properties, totaled $28.6&nbsp;million, or 80% of total nonperforming assets. Nonperforming
loans and foreclosed properties associated with the development of residential real estate totaled
$11.1&nbsp;million, with another $3.2&nbsp;million in nonperforming loans secured by, and foreclosed
properties consisting of, residential properties. Net loan and lease charge-offs during 2007
totaled $6.7&nbsp;million, or 0.38% of average total loans and leases. During 2006, net loan and lease
charge-offs totaled $4.9&nbsp;million, or 0.29% of average total loans and leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2008, we experienced a sudden and rapid deterioration in a number of
commercial loan relationships which previously had been performing fairly well. An analysis of
certain commercial borrowers revealed a reduced capability on the part of these borrowers to make
required payments as indicated by factors such as delinquent loan payments, diminished cash flow,
deteriorating financial performance, or past due property taxes, and in the case of commercial and
residential development projects slow absorption or sales trends. In addition, commercial real
estate is the primary source of collateral for many of these borrowing relationships and updated
evaluations and appraisals in many cases reflected significant declines from the original estimated
values.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2008, we found that the financial performance of some of our borrowers
and guarantors had become increasingly strained, as real estate remained unsold or insufficiently
leased and liquid sources of repayment were exhausted or significantly depleted. Completed
evaluations and appraisals during this period reflected substantial declines from the originally
estimated values, and in some cases even in comparison to property value estimates made within the
past several quarters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">While we continued to face a distressed operating environment during the third quarter of 2008, we
experienced a marked slowdown in borrowing relationships that deteriorated to nonperforming status.
In addition, we saw notable improvement in a number of larger commercial loan relationships.
Although we experienced a small net increase in the level of nonperforming assets during the third
quarter, the rate of increase was considerably lower than over the past few quarters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the fourth quarter of 2008, we saw a continuation of the stresses caused by the weakening
and poor economic conditions, especially in the commercial real estate markets. High vacancy rates
or slow absorption has resulted in inadequate cash flow generated from some real estate projects we
have financed, and has required guarantors to provide personal funds to make full contractual loan
payments and pay other operating costs. In some cases, the guarantors&#146; cash reserves have become
seriously diminished, not only from recent cash outlays but from depressed stock portfolios as well. In addition, auto industry uncertainties are placing stress on
the commercial and industrial segment of our loan portfolio.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-8<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2008, nonperforming assets totaled $57.4&nbsp;million, or 2.60% of total assets, an
increase from the $35.7&nbsp;million, or 1.68% of total assets, as of December&nbsp;31, 2007. Nonperforming
loans and leases totaled $49.3&nbsp;million and foreclosed properties/repossessed assets equaled $8.1
million at year-end 2008, compared to $29.8&nbsp;million and $5.9&nbsp;million, respectively, at year-end
2007. As of December&nbsp;31, 2008, nonperforming loans secured by real estate, combined with all
foreclosed properties, totaled $52.3&nbsp;million, or about 91% of total nonperforming assets.
Nonperforming loans and foreclosed properties associated with the development of residential real
estate totaled $25.3&nbsp;million, with another $4.2&nbsp;million in nonperforming loans secured by, and
foreclosed properties consisting of, residential properties. Net loan and lease charge-offs during
2008 totaled $19.9&nbsp;million, or 1.09% of average total loans and leases. During 2007, net loan and
lease charge-offs totaled $6.7&nbsp;million, or 0.38% of average total loans and leases. The increase
in net loan and lease charge-offs during 2008 primarily reflects a combination of a higher level of
nonperforming assets and the significant decline in property values.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides a breakdown of nonperforming assets as of December&nbsp;31, 2008 and net
loan charge-offs during 2008 by property type:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Nonperforming</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Loan</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Assets</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Charge-Offs</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD COLSPAN="9">&nbsp;</TD></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Residential &#151; Land Development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,273,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,624,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Residential &#151; Construction</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,040,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">604,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Residential &#151; Owner Occupied / Rental</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,160,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,850,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial &#151; Land Development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,234,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,599,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial &#151; Owner Occupied</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,495,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">789,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial &#151; NonOwner Occupied</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,055,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,710,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial &#151; NonReal Estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,134,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,688,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consumer &#151; NonReal Estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">57,421,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,906,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes nonperforming loans and leases and troubled debt restructurings:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">December 31, 2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loans and leases on
nonaccrual status</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">47,945,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28,832,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,752,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,601,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,842,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loans and leases 90
days or more past
due and accruing
interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,358,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">977,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">819,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">394,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Troubled debt
restructurings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">49,303,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29,809,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,571,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,995,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,842,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes changes in the allowance for loan and lease losses for the past five
years:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loan and leases outstanding at year-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,856,915,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,799,880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,745,478,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,561,812,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,317,124,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Daily average balance of loans and
leases outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,829,686,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,765,465,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,660,284,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,432,609,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,177,568,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance of allowance at beginning of
year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,814,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21,411,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,527,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,819,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,379,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loans and leases charged-off:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Commercial, financial and agricultural</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,566,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,232,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,208,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(718,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,328,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Construction and land development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,835,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,353,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(521,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(174,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Residential real estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,900,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,618,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(131,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Instalment loans to individuals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(119,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(53,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(131,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(61,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total loans and leases charged-off</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,594,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,274,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,389,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,392,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,405,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recoveries of previously charged-off
loans and leases:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Commercial, financial and agricultural</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">597,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">586,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">487,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Construction and land development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Residential real estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Instalment loans to individuals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total recoveries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">688,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">607,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">310,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net charge-offs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,906,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,667,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,891,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,082,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,234,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for loan and leases losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,070,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,775,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,790,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,674,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance of allowance at year-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">27,108,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,814,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21,411,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,527,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,819,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ratio of net charge-offs during the
period to average loans and leases
outstanding during the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.09</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.38</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.29</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.08</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.10</TD>
    <TD nowrap>%)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ratio of allowance to loans and leases
outstanding at end of the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.46</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.43</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.23</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.31</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.35</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In each accounting period, we adjust the allowance to the amount we believe is necessary to
maintain the allowance at adequate levels. Through the loan and lease review and credit
departments, we attempt to establish specific portions of the allowance based on specifically
identifiable problem loans and leases. The evaluation of the allowance is further based on, but
not limited to, consideration of the internally prepared Reserve Analysis, composition of the loan
and lease portfolio, third party analysis of the loan and lease administration processes and
portfolio and general economic conditions. In addition, the historically strong commercial loan
and lease growth and expansions into new markets are taken into account.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Reserve Analysis, used since our inception and completed monthly, applies reserve allocation
factors to outstanding loan and lease balances to calculate an overall allowance dollar amount.
For commercial loans and leases, which continue to comprise a vast majority of our total loans and
leases, reserve allocation factors are based upon the loan ratings as determined by our
standardized grade paradigms. For retail loans, reserve allocation factors are based upon the type
of credit. Adjustments for specific lending relationships, including impaired loans and leases,
are made on a case-by-case basis. The reserve allocation factors are primarily based on the recent
levels and historical trends of net loan charge-offs and non-performing assets, the comparison of
the recent levels and historical trends of net loan charge-offs and non-performing assets with a
customized peer group consisting of ten similarly-sized publicly traded banking organizations
conducting business in the states of Michigan, Illinois, Indiana or Ohio, the review and
consideration of our loan and lease migration analysis and the
experience of senior  management
making similar loans and leases for an extensive period of time. We regularly review the Reserve
Analysis and make adjustments periodically based upon identifiable trends and experience.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-10<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table illustrates the breakdown of the allowance balance to loan type (dollars in
thousands) and of the total loan and lease portfolio (in percentages).
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31, 2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31, 2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31, 2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31, 2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Loan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Loan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Loan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Loan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Loan</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Portfolio</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Portfolio</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Portfolio</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Portfolio</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Portfolio</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial,
financial and
agricultural</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">77.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">77.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">74.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">76.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">79.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction and
land development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Residential real
estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Instalment loans to
individuals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unallocated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">27,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The primary risk elements with respect to commercial loans and leases are the financial condition
of the borrower, the sufficiency of collateral, and lack of timely payment. We have a policy of
requesting and reviewing periodic financial statements from commercial loan and lease customers,
and we periodically review the existence of collateral and its value. The primary risk element
with respect to each instalment and residential real estate loan is lack of timely payment. We
have a reporting system that monitors past due loans and have adopted policies to pursue creditor&#146;s
rights in order to preserve our bank&#146;s position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Although we believe that the allowance is adequate to sustain losses as they arise, there can be no
assurance that our bank will not sustain losses in any given period that could be substantial in
relation to, or greater than, the size of the allowance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Securities increased $31.1&nbsp;million during 2008, from $211.7&nbsp;million on December&nbsp;31, 2007 to $242.8
million at December&nbsp;31, 2008. During 2008, the securities portfolio equaled 10.6% of average
earning assets. Proceeds from called U.S. Government Agency bonds totaled $60.0&nbsp;million during
2008, with another $8.1&nbsp;million received from principal paydowns on mortgage-backed securities and
$1.8&nbsp;million from matured and called tax-exempt municipal securities. The proceeds were invested
back into the securities portfolio, with $40.9&nbsp;million invested in U.S. Government Agency bonds and
$27.7&nbsp;million invested in mortgage-backed securities. We also purchased $27.6&nbsp;million in bonds
issued through the Michigan Strategic Fund during 2008, although we sold $5.5&nbsp;million shortly after
purchase. These bonds are purchased and sold at par value, and are sellable back to the
re-marketing brokerage firm weekly. In addition, FHLB of Indianapolis stock increased $5.9&nbsp;million
to support the increased level of FHLB advances. We maintain the securities portfolio at levels to
provide adequate pledging for the repurchase agreement program and secondary liquidity for our
daily operations. In addition, the portfolio serves a primary interest rate risk management
function. At December&nbsp;31, 2008, the portfolio was comprised of high credit quality U.S. Government
Agency issued bonds (26%), U.S. Government Agency issued and guaranteed mortgage-backed securities
(32%), tax-exempt municipal general obligation and revenue bonds (27%), Michigan Strategic Fund
bonds (9%), Federal Home Loan Bank stock (6%) and a mutual fund (less than 1%).
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-11<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table reflects the composition of the securities portfolio, excluding Federal Home
Loan Bank stock:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31, 2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31, 2006</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percentage</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percentage</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percentage</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. Government
agency debt
obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,382,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">27.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">80,945,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">76,836,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">39.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mortgage-backed
securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,026,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,619,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,083,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Municipal general
obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,893,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,668,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,870,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Municipal revenue
bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,544,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,662,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,073,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michigan Strategic
Fund bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,105,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mutual fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,156,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,109,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,048,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">227,106,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">202,003,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">194,910,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All securities, with the exception of tax-exempt municipal bonds, have been designated as
&#147;available for sale&#148; as defined in Statement of Financial Accounting Standards (SFAS)&nbsp;No.&nbsp;115,
<I>Accounting for Certain Investments in Debt and Equity Securities</I>. Securities designated as
available for sale are stated at fair value, with the unrealized gains and losses, net of income
tax, reported as a separate component of shareholders&#146; equity in accumulated other comprehensive
income. The fair value of securities designated as available for sale at December&nbsp;31, 2008 and
2007 was $162.7&nbsp;million and $136.7&nbsp;million, respectively. The net unrealized gain recorded at
year-end 2008 was $3.2&nbsp;million, compared to a net unrealized gain of $0.4&nbsp;million at year-end 2007.
All tax-exempt municipal bonds have been designated as &#147;held to maturity&#148; as defined in SFAS No.
115, and are stated at amortized cost. As of December&nbsp;31, 2008 and 2007, held to maturity
securities had an amortized cost of $64.4&nbsp;million and $65.3&nbsp;million and a fair value of $65.4
million and $66.4&nbsp;million, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Market values on our U.S. Government Agency bonds, mortgage-backed securities issued or guaranteed
by U.S. Government Agencies and tax-exempt municipal securities are determined on a monthly basis
with the assistance of a third party vendor. Evaluated pricing models that vary by type of
security and incorporate available market data are utilized. Standard inputs include issuer and
type of security, benchmark yields, reported trades, broker/dealer quotes and issuer spreads. The
market value of other securities is estimated at carrying value as those financial instruments are
generally bought and sold at par value. We believe our valuation methodology provides for a
reasonable estimation of market value, and that it is consistent with the requirements of SFAS No.
157. Reference is made to Note 15 for additional information.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-12<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table shows by class of maturities as of December&nbsp;31, 2008, the amounts and weighted
average yields of investment securities <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Yield</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. Treasury securities and obligations of U.S.
Government agencies and corporations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">One year or less</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">NA</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Over one through five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,235,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.70</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Over five through ten years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,065,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Over ten years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,082,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,382,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Obligations of states and political subdivisions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">One year or less</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,884,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Over one through five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,457,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.73</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Over five through ten years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,496,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Over ten years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,437,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mortgage-backed securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,026,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michigan Strategic Fund bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,105,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.99</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mutual fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,156,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">227,106,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.32</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Yields on tax-exempt securities are computed on a fully taxable-equivalent basis.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Federal funds sold, consisting of excess funds sold overnight to correspondent banks, are used to
manage daily liquidity needs and interest rate sensitivity. During 2008, the average balance of
these funds equaled 0.6% of average earning assets, up slightly from 0.4% during 2007. The levels
maintained during 2008 and 2007 are well within our internal policy guidelines. Given the volatile
market conditions, during the fourth quarter of 2008 we made the decision to operate with a higher
than normal balance of federal funds sold. It is expected that we will maintain the higher balance
of federal funds sold, likely to average 1.0% to 1.5% of average earning assets, until market
conditions return to more normalized levels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Non-Earning Assets</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash and due from bank balances decreased from $29.1&nbsp;million at December&nbsp;31, 2007, to $16.8&nbsp;million
on December&nbsp;31, 2008, a decrease of $12.3&nbsp;million. While we experienced only nominal change in our
cash balances, our due from bank balances declined significantly primarily due to two programs that
were instituted in mid 2007: 1) an image exchange program with our primary correspondent bank for
our outgoing cash letter that resulted in faster collection of items in the outgoing cash letter,
and 2) the virtual elimination of required reserves on deposit with the Federal Reserve Bank of
Chicago due to the institution of a deposit reclassification program. Cash and due from bank
balances averaged $21.0&nbsp;million, or 1.0% of average assets during 2008, compared to $33.1&nbsp;million,
or 1.6% of average assets, during 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net premises and equipment decreased from $34.3&nbsp;million at December&nbsp;31, 2007, to $32.3&nbsp;million on
December&nbsp;31, 2008, a decrease of $2.0&nbsp;million. Net purchases of premises and equipment during 2008
totaled $0.7, while depreciation and amortization expense equaled $2.7&nbsp;million.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-13<!-- /Folio -->
</DIV>



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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Source of Funds</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our major sources of funds are from deposits, repurchase agreements and FHLB advances. Total
deposits increased from $1,591.2&nbsp;million at December&nbsp;31, 2007, to $1,599.6&nbsp;million on December&nbsp;31,
2008, an increase of $8.4&nbsp;million. Local deposits decreased from $666.1&nbsp;million at year-end 2007,
to $470.4&nbsp;million at year-end 2008, a decrease of $195.7&nbsp;million. Out-of-area deposits increased
from $925.0&nbsp;million at December&nbsp;31, 2007, to $1,129.2&nbsp;million on December&nbsp;31, 2008, an increase of
$204.2&nbsp;million. FHLB advances increased from $180.0&nbsp;million at year-end 2007 to $270.0&nbsp;million at
year-end 2008, while repurchase agreements decreased from $97.5&nbsp;million to $94.4&nbsp;million, or $3.1
million, during the same time period. At December&nbsp;31, 2008, local deposits and repurchase
agreements equaled 28.0% of total funding liabilities, compared to 39.8% on December&nbsp;31, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We experienced declines in our local deposits throughout 2008, but especially during the latter
half of 2008, for a variety of reasons. First, we witnessed local depositors purposely reducing
their deposit balances with us, in large part reflecting their concerns over our financial health
and that of the entire banking industry, with some larger depositors transferring portions of their
deposit balances to one or more other financial institutions. This practice was very pronounced
with our municipality and larger business and individual deposit customers. Next, we lost deposit
balances due to relatively high certificate of deposit rates offered by some financial institutions
located in our markets. While we believe our certificate of deposit rates, which in most cases
exceed the rates offered in the brokered deposit markets, are competitive, some financial
institutions in our markets were offering certificate of deposit rates that far exceeded our rates,
sometimes by as much as 100 basis points. Finally, it appears that the distressed economy is
resulting in some of our business customers having lower checking and savings account balances and
municipal customers having lower savings and certificate of deposit balances than typical.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Noninterest-bearing checking deposit accounts declined $22.4&nbsp;million during 2008, primarily
resulting from lower deposit balances from our title company depositors due in large part to lower
volumes of real estate transactions. Interest-bearing checking accounts increased $5.8&nbsp;million and
money market deposit accounts increased $13.0&nbsp;million during 2008, the latter primarily reflecting
a $10.0&nbsp;million deposit from a local municipality. Savings account balances recorded a decrease of
$30.8&nbsp;million during 2008, while certificates of deposit purchased by customers located within our
market areas decreased $161.4&nbsp;million. These declines are due to a combination of risk
diversification practices on the part of the depositors, higher deposit rates offered by
competitors and lower funds available stemming from the distressed economy. One municipal
depositor withdrew about $32.0&nbsp;million in December of 2008 upon the maturity of a single
certificate of deposit, but soon thereafter opened a $10.0&nbsp;million money market deposit account and
then in January&nbsp;2009 opened a new $20.0&nbsp;million certificate of deposit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The local deposit environment was very challenging during 2008, and it appears that it will remain
that way for at least the next few quarters. Until our operating results and overall financial
health improve, as well as that of the entire banking industry, it is very likely that some
customers will continue to engage in risk diversification practices. Combined with a distressed
economy and a competitive banking environment, our ability to raise local deposits efficiently and
economically will be difficult. However, we continue to enjoy deposit relationships with virtually
all of our customers who have withdrawn some of their deposits, and we have developed various
strategic plans and initiatives to hopefully regain a majority of the lost deposits in future
periods. Maintaining and growing our local deposit base is one of our key initiatives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certificates of deposit obtained from customers located outside of our market areas increased by
$204.2&nbsp;million during 2008, and as of December&nbsp;31, 2008 totaled $1,129.2&nbsp;million. The increase
primarily reflects the decline in our local deposit base, net of the growth in FHLB advances.
Out-of-area deposits consist primarily of certificates of deposit placed by deposit brokers for a
fee, but also include certificates of deposit obtained from the deposit owners directly. The
owners of the out-of-area deposits include individuals, businesses and governmental units located
throughout the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Repurchase agreements decreased $3.1&nbsp;million during 2008, and as of December&nbsp;31, 2008 totaled $94.4
million. As part of our sweep account program, collected funds from certain business
noninterest-bearing checking accounts are invested in overnight interest-bearing repurchase
agreements. Such repurchase agreements are not deposit accounts and are not afforded federal
deposit insurance.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-14<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FHLB advances increased $90.0&nbsp;million during 2008, and as of December&nbsp;31, 2008 totaled $270.0
million. FHLB advances are collateralized by residential mortgage loans, first mortgage liens on
multi-family residential property
loans, first mortgage liens on commercial real estate property loans, and substantially all other
assets of our bank, under a blanket lien arrangement. Our borrowing line of credit at December&nbsp;31,
2008 totaled $316.5&nbsp;million, with availability approximating $37.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Shareholders&#146; equity decreased $3.8&nbsp;million during 2008. The decrease was primarily attributable
to net loss from operations, which totaled $5.0&nbsp;million during 2008. Also negatively impacting
shareholders&#146; equity during 2008 was the payment of cash dividends, which totaled $2.6&nbsp;million.
Positively impacting shareholders&#146; equity was unrealized gains for a $1.8&nbsp;million, net of tax,
adjustment for available for sale securities as defined in SFAS No.&nbsp;115, and a $1.2&nbsp;million, net of
tax, change in the fair value of interest rate swaps.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>RESULTS OF OPERATIONS</B><BR>
<B>FOR THE YEARS ENDED DECEMBER 31, 2008 and 2007</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Summary</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A net loss of $5.0&nbsp;million, or $0.59 per basic and diluted share, was recorded in 2008, compared to
net income of $9.0&nbsp;million, or $1.06 per basic and diluted share, generated in 2007. The decline
in earnings performance during 2008 from that of 2007 is primarily the result of lower net interest
income and a higher provision for loan and lease losses. Net income during 2007 includes a
one-time $1.2&nbsp;million ($0.8&nbsp;million after-tax) expense associated with the financial retirement
package for former Chairman and Chief Executive Officer, Gerald R. Johnson Jr., which was recorded
in conjunction with Mr.&nbsp;Johnson&#146;s retirement effective June&nbsp;30, 2007. Excluding this one-time
expense, net income for 2007 was $9.8&nbsp;million, or $1.16 per basic share and $1.15 per diluted
share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table shows some of the key performance and equity ratios for the years ended
December&nbsp;31, 2008 and 2007:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2007</TD>
</TR>

<TR><TD colspan="9">&nbsp;</TD></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Return on average assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.23</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.43</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Return on average shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.87</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend payout ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52.16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average shareholders&#146; equity to average assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.44</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Net Interest Income</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net interest income, the difference between revenue generated from earning assets and the interest
cost of funding those assets, is our primary source of earnings. Interest income (adjusted for
tax-exempt income) and interest expense totaled $122.3&nbsp;million and $74.9&nbsp;million during 2008,
respectively, providing for net interest income of $47.4&nbsp;million. During 2007, interest income and
interest expense were $145.4&nbsp;million and $88.6&nbsp;million, respectively, providing for net interest
income of $56.8&nbsp;million. In comparing 2008 with 2007, interest income decreased 15.9%, interest
expense was down 15.5%, and net interest income decreased 16.4%. The level of net interest income
is primarily a function of asset size, as the weighted average interest rate received on earning
assets is greater than the weighted average interest cost of funding sources; however, factors such
as types and levels of assets and liabilities, interest rate environment, interest rate risk, asset
quality, liquidity, and customer behavior also impact net interest income as well as the net
interest margin.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-15<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The net interest margin declined from 2.87% in 2007 to 2.30% in 2008, a decrease of 19.9%. With
approximately 60% of our total loans and leases tied to Prime or LIBOR rates, our earning asset
yield in 2008 has been substantially impacted by the steep reduction in market interest rates that
began late in the third quarter of 2007. Between mid-September&nbsp;2007 and late April&nbsp;2008, the
Federal Open Market Committee (&#147;FOMC&#148;) lowered the
targeted federal funds rate by a total of 325 basis points. The resulting similar decline in the
Prime and LIBOR rates, combined with an increased level of nonperforming assets, a very competitive
loan and deposit environment, and a flat to inverted yield curve over an extended period of time,
have significantly negatively impacted our yield on earning assets and level of interest income.
Our cost of funds also decreased in 2008 compared to 2007 as we paid lower interest rates on our
deposits and borrowings; however, due to a significant portion of our interest-bearing liabilities
being comprised of fixed rate certificates of deposit and borrowings, our cost of funds declined at
a much slower rate than our earning asset yield, resulting in the compressed net interest margin.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The decision by the FOMC to lower the targeted federal funds rate by 50 basis points in early
October&nbsp;2008 placed additional pressure on our yield on earning assets and level of interest income
in light of our Prime-based loans repricing downward. Although the FOMC lowered the targeted
federal funds rate by another 50 basis points in late October&nbsp;2008 and an additional 75 basis
points in mid-December&nbsp;2008, we decided to keep the Mercantile Bank Prime Rate unchanged at 4.50%.
Virtually all of our prime-based commercial floating rate loans are tied to the Mercantile Bank
Prime Rate. Despite the 100 basis point reduction in the targeted federal funds rate in October
2008, deposit rates remained substantially unchanged. The steady deposit rates, combined with an
already very low Prime Rate, placed significant pressure on our net interest income and net
interest margin, and we believed it was prudent to not lower the Mercantile Bank Prime Rate in
association with the FOMC&#146;s 50 basis point reduction in the targeted federal funds rate in late
October and the 75 basis point reduction in mid-December.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our net interest margin, which equaled 2.15% in the second quarter of 2008, has improved over the
last six months of 2008, equaling 2.30% and 2.40% in the third and fourth quarters of 2008,
respectively. Our implementation of several loan pricing initiatives, including the decision to
not lower the Mercantile Prime Rate in association with the two most recent FOMC rate reductions,
stabilized our yield on loans and leases in the latter part of 2008. The stabilization of our
earning asset yield, which is most influenced by our yield on loans and leases, combined with a
reduction in our cost of funds resulting from maturing fixed rate certificates of deposit and
borrowings repricing downward in light of decreased market interest rates, resulted in the improved
net interest margin. If the interest rate environment stabilizes in 2009, we anticipate that the
quarterly net interest margin improvement experienced during the last two quarters of 2008 will
continue as we continue to reprice maturing fixed rate liabilities downward.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the first six months of 2008, we entered into interest rate swaps to convert the variable
rate cash flows on certain of our Prime-based commercial loans to a fixed rate of interest. On
October&nbsp;30, 2008, we terminated all of our interest rate swaps. The termination coincides with our
decision to not lower the Mercantile Bank Prime Rate in association with the FOMC&#146;s reduction of
the targeted federal funds rate by 50 basis points announced on October&nbsp;29, 2008. During 2008, the
net cash flow received from the interest rate swap arrangements contributed $1.0&nbsp;million to
interest income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table depicts the average balance, interest earned and paid, and weighted average
rate of our assets, liabilities and shareholders&#146; equity during 2008, 2007 and 2006. The
subsequent table also depicts the dollar amount of change in interest income and interest expense
of interest-earning assets and interest-bearing liabilities, segregated between change due to
volume and change due to rate. For tax-exempt investment securities, interest income and yield
have been computed on a tax equivalent basis using a marginal tax rate of 35%. As a result,
securities interest income was increased by $1.2&nbsp;million in each of 2008, 2007 and 2006.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-16<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="34">Years ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">(Dollars in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Balance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Rate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Balance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Rate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Balance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Rate</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR>
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taxable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">147,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.34</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">141,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,243</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.13</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">128,382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.11</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax-exempt
securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loans and leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,829,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,765,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,660,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.68</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term
investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Federal funds sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.95</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total earning
assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,058,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,979,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,860,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for loan
and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,184</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23,157</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,464</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and due
from banks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other non-earning
assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,157,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,083,846</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,959,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest-bearing
demand deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.15</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.82</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.93</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Savings deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Money market
accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Time deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,332,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,385,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,289,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total interest-bearing deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,453,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,812</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,520,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,429,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term
borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.78</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Federal Home Loan
Bank advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">258,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term
borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total interest-bearing liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,856,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,768,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,663,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Demand deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,984,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,907,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,797,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total liabilities
and equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,157,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,083,846</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,959,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net interest
income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">47,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rate spread</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.91</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.33</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.89</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net interest
margin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.30</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.87</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.37</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22">Years ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">2008 over 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">2007 over 2006</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Volume</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Rate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Volume</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Rate</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease)&nbsp;in interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Taxable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">645,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">334,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">311,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">686,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">662,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax exempt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">348,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(181,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(53,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23,672,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,713,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(28,385,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,215,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,984,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,769,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal funds sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(216,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(337,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(76,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net change in tax-equivalent
income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23,089,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,512,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(28,601,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,930,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,713,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,783,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease)&nbsp;in interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest-bearing demand deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(555,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(694,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Savings deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,055,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(599,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,456,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(351,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(246,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(105,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Money market accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(167,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(226,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Time deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,632,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,673,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,959,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,805,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,644,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,161,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,472,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,616,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">626,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">652,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal Home Loan Bank
advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,454,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,927,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,473,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">707,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(137,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">844,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(334,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">655,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(989,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net change in interest
expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,761,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,651,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,412,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,951,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,027,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,924,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net change in tax-equivalent
net interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,328,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,861,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(11,189,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6,021,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,686,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(9,707,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest income is primarily generated from the loan and lease portfolio, and to a lesser degree,
from securities, federal funds sold, and short term investments. Interest income decreased $23.1
million during 2008 from that earned in 2007, totaling $122.3&nbsp;million in 2008 compared to $145.4
million in the previous year. The decrease is primarily due to the lower interest rate environment
and increased level of nonperforming assets during 2008 when compared to 2007, which more than
offset the growth in average earning assets year over year. The yield on average earning assets
declined from 7.34% in 2007 to 5.94% in 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2008, average earning assets increased $79.4&nbsp;million, from $1,979.6&nbsp;million in 2007 to
$2,059.0&nbsp;million during 2008. Growth in average total loans and leases, totaling $64.2&nbsp;million,
comprised 80.9% of the increase in average earning assets during 2008. Interest income generated
from the loan and lease portfolio decreased $23.7&nbsp;million in 2008 compared to the level earned in
2007; a decline in loan yield from 7.57% in 2007 to 6.01% in 2008 resulted in a $28.4&nbsp;million
reduction in interest income while growth in the loan and lease portfolio during 2008 resulted in a
$4.7&nbsp;million increase in interest income. The decrease in the loan and lease portfolio yield is
primarily due to a lower interest rate environment during 2008 than in 2007 and an increase in
nonperforming loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest income generated from the securities portfolio increased in 2008 compared to the level
earned in 2007 as a result of growth in the portfolio and an increased yield. Average securities
increased by $12.1&nbsp;million in 2008, increasing from $205.4&nbsp;million in 2007 to $217.5&nbsp;million in
2008. The growth equated to an increase in interest income of $0.7&nbsp;million. The improved yield,
which equaled 5.55% in 2008 compared to 5.48% in 2007, resulted in a $0.1&nbsp;million increase in
interest income. Interest income earned on federal funds sold decreased by $0.2&nbsp;million due to a
decline in the average rate, which more than offset an increase in the average balance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest expense is primarily generated from interest-bearing deposits, and to a lesser degree,
from repurchase agreements, FHLB advances, and subordinated debentures. Interest expense decreased
$13.7&nbsp;million during 2008 from that expensed in 2007, totaling $74.9&nbsp;million in 2008 compared to
$88.6&nbsp;million in the previous year. The decline in interest expense is primarily attributable to a
decreased cost of funds, which mainly resulted from maturing fixed rate certificates of deposit and
borrowings being renewed or replaced at lower interest rates, reflecting the decreased interest
rate environment in 2008. Interest-bearing liabilities averaged $1,856.7&nbsp;million during 2008, or
$87.8&nbsp;million higher than the average interest-bearing liabilities of $1,768.9&nbsp;million during 2007.
This growth resulted in increased interest expense of $3.7&nbsp;million. A decline in interest expense
of $17.4&nbsp;million was recorded during 2008 due to a decreased cost of funds primarily attributable
to lower average rates paid on fixed rate certificates of deposit and borrowings. The cost of
average interest-bearing liabilities decreased from the 5.01% recorded in 2007 to 4.03% in 2008.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-18<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Average certificates of deposit declined $53.2&nbsp;million during 2008, which equated to a decrease in
interest expense of $2.7&nbsp;million. An additional $10.9&nbsp;million reduction in interest expense
resulted from a decrease in the average rate paid as higher-rate certificates of deposit matured
and were either renewed or replaced with lower-costing certificates of deposit throughout 2008. A
decline in other average interest-bearing deposit accounts, totaling $13.1&nbsp;million, equated to a
decrease in interest expense of $0.4&nbsp;million, with an additional interest expense reduction of $2.4
million recorded due to a decrease in the average rate paid during 2008.</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Average short-term borrowings, primarily comprised of repurchase agreements and federal funds
purchased, increased $4.0&nbsp;million during 2008, resulting in increased interest expense of $0.1
million, while a decrease in the
average rate paid during 2008 resulted in a reduction in interest expense of $1.6&nbsp;million. Average
FHLB advances increased $140.0&nbsp;million, equating to an increase in interest expense of $5.9
million, while a decreased average rate paid on the advances resulted in a $1.5&nbsp;million reduction
in interest expense. Growth in average long-term borrowings, which is comprised of subordinated
debentures, structured repurchase agreements, and deferred director and officer compensation
programs, equated to an increase in interest expense of $0.7&nbsp;million during 2008, with a decreased
average rate reducing interest expense by $1.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Provision for Loan and Lease Losses</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The provision for loan and lease losses totaled $21.2&nbsp;million in 2008, compared to the $11.1
million expensed in 2007. The increase primarily reflects a higher volume of nonperforming loans
and leases, increased net loan charge-offs, and other downgrades within our commercial loan and
lease portfolio, necessitating a higher allowance balance. Nonperforming loans and leases totaled
$49.3&nbsp;million, or 2.66% of total loans and leases, as of December&nbsp;31, 2008, compared to $29.8
million, or 1.66% of total loans and leases, as of December&nbsp;31, 2007. Net loan and lease
charge-offs during 2008 totaled $19.9&nbsp;million, or 1.09% of average total loans and leases. Net
loan and lease charge-offs during 2007 totaled $6.7&nbsp;million, or 0.38% of average total loans and
leases. Loan and lease growth during 2008 equaled $57.0&nbsp;million, compared to loan and lease growth
of $54.4&nbsp;million during 2007. The allowance as a percentage of total loans outstanding as of
December&nbsp;31, 2008 was 1.46%, compared to 1.43% at year-end 2007. Although we believe the allowance
is adequate to cover losses as they arise, there can be no assurance that we will not sustain
losses in any given period that could be substantial in relation to, or greater than, the size of
the allowance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In each accounting period, we adjust the allowance to the amount we believe is necessary to
maintain the allowance at adequate levels. Through the loan and lease review and credit
departments, we attempt to allocate specific portions of the allowance based on specifically
identifiable problem loans and leases. The evaluation of the allowance is further based on, but
not limited to, consideration of the internally prepared Reserve Analysis, composition of the loan
and lease portfolio, third party analysis of the loan and lease administration processes and
portfolio and general economic conditions. In addition, the historically strong commercial loan
and lease growth and expansions into new markets are taken into account.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Reserve Analysis, used since our inception and completed monthly, applies reserve allocation
factors to outstanding loan and lease balances to calculate an overall allowance dollar amount.
For commercial loans and leases, which continue to comprise a vast majority of our total loans and
leases, reserve allocation factors are based upon the loan ratings as determined by our
standardized grade paradigms. For retail loans, reserve allocation factors are based upon the type
of credit. Adjustments for specific lending relationships, including impaired loans and leases,
are made on a case-by-case basis. The reserve allocation factors are primarily based on the recent
levels and historical trends of net loan charge-offs and non-performing assets, the comparison of
the recent levels and historical trends of net loan charge-offs and non-performing assets with a
customized peer group consisting of ten similarly-sized publicly traded banking organizations
conducting business in the states of Michigan, Illinois, Indiana or Ohio, the review and
consideration of our loan and lease migration analysis and the experience of senior management
making similar loans and leases for an extensive period of time. We regularly review the Reserve
Analysis and make adjustments periodically based upon identifiable trends and experience.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-19<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Noninterest Income</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Noninterest income totaled $7.3&nbsp;million in 2008, an increase of $1.4&nbsp;million from the $5.9&nbsp;million
earned in 2007. Service charge income on deposits and repurchase agreements increased $0.4&nbsp;million
during 2008 when compared to 2007, primarily reflecting a decrease in the earnings credit rate and
improved collection of overdraft service charges. Earnings from the increased cash surrender value
of bank owned life insurance policies, primarily reflecting additional investments during the year
and improved yields, increased $0.5&nbsp;million in 2008. Residential mortgage banking fees increased
$0.2&nbsp;million in 2008 due to a higher volume of activity. We recorded increases in virtually all
other fee income-producing activities in 2008 when compared to 2007 primarily due to increased
volumes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Noninterest Expense</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Noninterest expense during 2008 totaled $42.1&nbsp;million, an increase of $3.7&nbsp;million over the $38.4
million expensed in 2007. Salary expense and benefit costs decreased $0.4&nbsp;million in 2008 when
compared to 2007. Included in 2007 salary and benefit costs is a one-time $1.2&nbsp;million expense
associated with the financial retirement package for former Chairman and Chief Executive Officer,
Gerald R. Johnson, Jr., in conjunction with Mr.&nbsp;Johnson&#146;s retirement effective June&nbsp;30, 2007.
Salary expense and benefit costs increased $0.8&nbsp;million in 2008 if this one-time expense is
excluded from 2007 salary and benefit costs; the resulting increase primarily reflects annual pay
increases and the hiring of additional staff related to our expansion into Oakland County in late
2007. Occupancy, furniture and equipment costs increased $0.4&nbsp;million in 2008. Costs associated
with the administration and resolution of problem assets, including legal costs, property tax
payments, appraisal fees and write-downs on foreclosed properties, totaled $3.3&nbsp;million in 2008
compared to $1.1&nbsp;million in 2007. FDIC deposit insurance assessments totaled $1.9&nbsp;million in 2008
compared to $0.7&nbsp;million in 2007. The FDIC issued a final rule in December&nbsp;2008 that uniformly
raised deposit insurance assessment rates for the first quarter of 2009 and indicated that another
final rule will be issued in early 2009 that will modify the current deposit insurance assessment
methodology. Our 2009 FDIC deposit insurance assessments may increase as a result of these changes
in methodology. Other non-interest expenses, in aggregate, increased $0.3&nbsp;million in 2008 when
compared to 2007, reflecting additional expenditures required to administer an increased asset
base.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Federal Income Tax Expense</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2008, we recorded a loss before federal income tax of $9.8&nbsp;million and a federal income tax
benefit of $5.0&nbsp;million, compared to net income before federal income tax of $12.0&nbsp;million and
federal income tax expense of $3.0&nbsp;million during 2007. Our effective tax rate for 2008 was
(49.6%), compared to 25.3% for 2007. The difference in the effective tax rate primarily reflects
the significant difference in income before federal income tax expense (benefit), and the
relationship of tax-exempt income to income (loss)&nbsp;before federal income tax expense (benefit).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS No.&nbsp;109, <I>Accounting for Income Taxes</I>, requires that companies assess whether a valuation
allowance should be established against their deferred tax assets based on the consideration of all
available evidence using a &#147;more likely than not&#148; standard. In accordance with SFAS No.&nbsp;109, we
reviewed our deferred tax assets and determined that no valuation allowance was necessary at year
end 2008 or 2007. Despite the loss in 2008 and the challenging economic environment, we are in a
cumulative income position, have a history of strong earnings, are well-capitalized, and have
cautiously optimistic expectations regarding future taxable income. In making such judgments,
significant weight is given to evidence that can be objectively verified. In making decisions
regarding any valuation allowance, we consider both positive and negative evidence and analyze
changes in near-term market conditions as well as other factors which may impact future operating
results. The deferred tax assets will be analyzed quarterly for changes affecting realizability,
and there can be no guarantee that a valuation allowance will not be necessary in future periods.
</DIV>


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</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>RESULTS OF OPERATIONS</B><BR>
<B>FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Summary</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net income during 2007 was $9.0&nbsp;million, or $1.06 per basic and diluted share, compared to net
income of $19.8&nbsp;million, or $2.36 per basic share and $2.33 per diluted share, recorded in 2006.
The $10.8&nbsp;million decline in net income represents a decrease of 54.8%, while diluted earnings per
share were down 54.5%. The decline in net income during 2007 from that of 2006 is primarily the
result of lower net interest income and a higher provision for loan and lease losses. In addition,
net income during 2007 includes a one-time $1.2&nbsp;million ($0.8&nbsp;million after-tax) expense associated
with the financial retirement package for former Chairman and Chief Executive Officer, Gerald R.
Johnson Jr., which was recorded in conjunction with Mr.&nbsp;Johnson&#146;s retirement effective June&nbsp;30,
2007. Excluding this one-time expense, net income for 2007 was $9.8&nbsp;million, or $1.16 per basic
share and $1.15 per diluted share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table shows some of the key performance and equity ratios for the years ended
December&nbsp;31, 2007 and 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Return on average assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.43</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.01</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Return on average shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend payout ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average shareholders&#146; equity to average assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.31</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Net Interest Income</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net interest income, the difference between revenue generated from earning assets and the interest
cost of funding those assets, is our primary source of earnings. Interest income (adjusted for
tax-exempt income) and interest expense totaled $145.4&nbsp;million and $88.6&nbsp;million during 2007,
respectively, providing for net interest income of $56.8&nbsp;million. During 2006, interest income and
interest expense were $138.5&nbsp;million and $75.7&nbsp;million, respectively, providing for net interest
income of $62.8&nbsp;million. In comparing 2007 with 2006, interest income increased 5.0%, interest
expense was up 17.1% and net interest income decreased 9.6%. The level of net interest income is
primarily a function of asset size, as the weighted average interest rate received on earning
assets is greater than the weighted average interest cost of funding sources; however, factors such
as types and levels of assets and liabilities, interest rate environment, interest rate risk, asset
quality, liquidity, and customer behavior also impact net interest income as well as the net
interest margin.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The net interest margin declined from 3.37% in 2006 to 2.87% in 2007, a decrease of 14.8%. Our net
interest margin during 2005 was 3.50%. Throughout 2005 and during the first half of 2006, our net
interest margin was generally on an increasing trend. From June&nbsp;2004 through June&nbsp;2006, the FOMC
increased the federal funds rate by 25 basis points at 17 consecutive meetings, causing the prime
rate to increase from 4.00% in June&nbsp;2004 to 8.25% in June&nbsp;2006. Our yield on assets increased
significantly during this time period, as the interest rates on over 70% of our total loans and
leases were tied to the prime rate. Our cost of funds also increased during this time period, as
interest rates paid on our deposits and borrowings increased as well. However, our cost of funds
increased at a slower rate than the increase in our yield on assets, with a significant portion of
our interest-bearing liabilities comprised of fixed rate certificates of deposit and borrowings,
resulting in a lagged increased cost of funds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">From the period of June&nbsp;2006 through September&nbsp;2007, the FOMC left the federal funds rate
unchanged, resulting in a relatively steady yield on assets. However, our cost of funds continued
to increase as maturing fixed rate certificates of deposit and borrowings, which were obtained
during lower interest rate environments, were replaced or renewed at higher interest rates,
resulting in a declining net interest margin. In September&nbsp;2007, the FOMC started to aggressively
lower the federal funds rate with three interest rate reductions totaling 100 basis points through
the end of 2007, causing the prime rate to decline from 8.25% to 7.25%. With about 60% of our
total loans and leases tied to the prime rate and a significant portion of our interest-bearing
liabilities comprised of fixed rate certificates of deposit and borrowings, our asset yield
declined at a much faster rate than our cost of funds, resulting in further compression of our net
interest margin.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Also negatively impacting our net interest margin during 2007 was an increase in nonperforming
assets, with a higher level of loans on nonaccrual status and a higher balance of foreclosed
properties than in previous periods. A very competitive loan and deposit pricing environment,
combined with a continuation of a flat to inverted yield curve, also negatively impacted our net
interest margin.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest income is primarily generated from the loan and lease portfolio, and to a lesser degree
from securities, federal funds sold and short term investments. Interest income increased $6.9
million during 2007 from that earned in 2006, totaling $145.4&nbsp;million in 2007 compared to $138.5
million in the previous year. The increase is primarily due to the growth in earning assets, which
more than offset the lower interest rate environment and increased level of nonperforming assets
during 2007 when compared to 2006. The yield on average earning assets declined from 7.44%
recorded in 2006 to 7.34% in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2007, average earning assets increased $118.9&nbsp;million, from $1,860.7&nbsp;million in 2006 to
$1,979.6&nbsp;million during 2007. Growth in average total loans and leases, totaling $105.2&nbsp;million,
comprised 88.5% of the increase in average earning assets during 2007. Interest income generated
from the loan and lease portfolio increased $6.2&nbsp;million during 2007 over the level earned in 2006,
comprised of an increase of $8.0&nbsp;million from the growth in the loan and lease portfolio and a
decrease of $1.8&nbsp;million due to a decline in the yield earned on the loan portfolio to 7.57% from
7.68%. The decrease in the loan and lease portfolio yield is primarily due to a lower interest
rate environment during 2007 than in 2006 and an increase in nonperforming loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Growth in the securities portfolio also added to the increase in interest income during 2007 over
that of 2006. Average securities increased by $15.1&nbsp;million in 2007, increasing from $190.3
million in 2006 to $205.4&nbsp;million in 2007. The growth equated to an increase in interest income of
$0.8&nbsp;million. The yield earned on the securities portfolio decreased slightly during 2007, from
5.51% to 5.48%. Interest income earned on federal funds sold decreased by $0.1&nbsp;million due to a
small decline in the average balance during 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest expense is primarily generated from interest-bearing deposits, and to a lesser degree from
repurchase agreements, FHLB advances and subordinated debentures. Interest expense increased $12.9
million during 2007 from that expensed in 2006, totaling $88.6&nbsp;million in 2007 compared to $75.7
million in the previous year. The increase in interest expense is primarily attributable to the
impact of an increase in interest-bearing liabilities and an increased cost of funds associated
with the renewal and replacement of maturing fixed rate certificates of deposit and borrowings in
2007 that were obtained during periods of lower interest rates when compared to the interest rate
environment during 2007. Interest-bearing liabilities averaged $1,768.9&nbsp;million during 2007, or
$105.5&nbsp;million higher than the average interest-bearing liabilities of $1,663.4&nbsp;million during
2006. This growth resulted in increased interest expense of $5.0&nbsp;million. An increase in interest
expense of $7.9&nbsp;million was recorded during 2007 primarily due to an increased cost of funds
primarily attributable to fixed rate certificates of deposit and borrowings. The cost of average
interest-bearing liabilities increased from the 4.55% recorded in 2006 to 5.01% in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Average certificate of deposit growth during 2007 of $95.5&nbsp;million equated to an increase in
interest expense of $4.6&nbsp;million, with an additional $7.2&nbsp;million expensed due to the increase in
the average rate paid as lower-rate certificates of deposit matured and were either renewed or
replaced with higher-costing certificates of deposit throughout 2007. A decline in other average
interest-bearing deposit accounts, totaling $5.0&nbsp;million, equated to a decrease in interest expense
of $0.2&nbsp;million, with an additional interest expense reduction of $0.2&nbsp;million recorded due to a
decrease in the average rate paid during 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Average short term borrowings, comprised of repurchase agreements and federal funds purchased,
increased $17.4&nbsp;million during 2007, resulting in increased interest expense of $0.7&nbsp;million, with
a slight reduction in interest expense due to a decrease in the average rate paid during 2007.
Average FHLB advances decreased $3.0&nbsp;million, equating to a decrease in interest expense of $0.1
million; however, an increased average rate added $0.8&nbsp;million to interest expense. Growth in
average long-term borrowings, comprised of subordinated debentures
and deferred  director and
officer compensation programs, equated to an increase in interest expense of less than $0.1&nbsp;million
during 2007, with an increased average rate adding $0.1&nbsp;million to interest expense.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Provision for Loan and Lease Losses</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The provision for loan and lease losses totaled $11.1&nbsp;million during 2007, compared to the $5.8
million expensed during 2006. The increase primarily reflects a higher volume of nonperforming
loans and leases and other downgrades within our commercial loan and lease portfolio, necessitating
a higher allowance balance. Nonperforming loans and leases totaled $29.8&nbsp;million, or 1.66% of
total loans and leases, as of December&nbsp;31, 2007, compared to $8.6&nbsp;million, or 0.49% of total loans
and leases, as of December&nbsp;31, 2006. Net loan and lease charge-offs during 2007 totaled $6.7
million, or 0.38% of average total loans and leases. Net loan and lease charge-offs during 2006
totaled $4.9&nbsp;million, or 0.29% of average total loans and leases. Loan and lease growth during
2007 equaled $54.4&nbsp;million, compared to loan and lease growth of $183.7&nbsp;million during 2006. The
allowance as a percentage of total loans outstanding as of December&nbsp;31, 2007 was 1.43%, compared to
1.23% at year-end 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In each accounting period, we adjust the allowance to the amount we believe is necessary to
maintain the allowance at adequate levels. Through the loan and lease review and credit
departments, we attempt to allocate specific portions of the allowance based on specifically
identifiable problem loans and leases. The evaluation of the allowance is further based on, but
not limited to, consideration of the internally prepared Reserve Analysis, composition of the loan
and lease portfolio, third party analysis of the loan and lease administration processes and
portfolio and general economic conditions. In addition, the historically strong commercial loan
and lease growth and expansions into new markets are taken into account.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Noninterest Income</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Noninterest income totaled $5.9&nbsp;million in 2007, an increase of $0.6&nbsp;million from the $5.3&nbsp;million
earned in 2006. Service charge income on deposits and repurchase agreements increased $0.2
million during 2007 when compared to 2006, reflecting an increase in the number of deposit accounts
and modest increases in our fee structure. Earnings from increased cash surrender value of bank
owned life insurance policies increased $0.1&nbsp;million in 2007, primarily reflecting a higher balance
from the purchase of additional policies during the year. We recorded increases in virtually all
other fee income-producing activities in 2007 when compared to 2006, with the exception of
residential mortgage banking fees, which decreased $0.1&nbsp;million due to a lower volume of activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Noninterest Expense</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Noninterest expense during 2007 totaled $38.4&nbsp;million, an increase of $6.1&nbsp;million over the $32.3
million expensed in 2006. Salary expense and benefit costs increased $3.9&nbsp;million in 2007 when
compared to 2006. Included in 2007 salary and benefit costs is a one-time $1.2&nbsp;million expense
associated with the financial retirement package for former Chairman and Chief Executive Officer,
Gerald R. Johnson, Jr., in conjunction with Mr.&nbsp;Johnson&#146;s retirement effective June&nbsp;30, 2007. The
remainder of the increase in salary and benefit costs during 2007 primarily reflects the increase
in full-time equivalent employees from 291 at year-end 2006 to 306 at year-end 2007 and annual pay
increases. Occupancy, furniture and equipment costs increased $0.2&nbsp;million in 2007. Other
non-interest expenses, in aggregate, increased $2.0&nbsp;million in 2007 when compared to 2006,
reflecting increased costs associated with a higher level of nonperforming assets, higher FDIC
insurance premiums and additional expenditures required to administer an increased asset base.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Federal Income Tax Expense</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Federal income tax expense was $3.0&nbsp;million in 2007, a decrease of $6.0&nbsp;million from the $9.0
million expensed during 2006. The decrease during 2007 is primarily due to the decline in our
pre-federal income tax profitability. Our effective tax rate for 2007 was 25.3%, compared to 31.1%
in 2006, reflecting a decrease in taxable income and the related increase in tax-exempt income as a
percent of taxable income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CAPITAL RESOURCES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Shareholders&#146; equity is a noninterest-bearing source of funds that generally provides support for
our asset growth. Shareholders&#146; equity was $174.4&nbsp;million and $178.2&nbsp;million at December&nbsp;31, 2008
and 2007,
respectively. The $3.8&nbsp;million decline during 2008 is primarily attributable to net loss from
operations, which totaled $5.0&nbsp;million. Also negatively impacting shareholders&#146; equity during 2008
was the payment of cash dividends, which totaled $2.6&nbsp;million. Positively impacting shareholders&#146;
equity was unrealized gains for a $1.8&nbsp;million, net of tax, adjustment for available for sale
securities as defined in SFAS No.&nbsp;115, and a $1.2&nbsp;million, net of tax, change in the fair value of
interest rate swaps.</div>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We and our bank are subject to regulatory capital requirements administered by state and federal
banking agencies. Failure to meet the various capital requirements can initiate regulatory action
that could have a direct material effect on the financial statements. Our and our bank&#146;s capital
ratios as of December&nbsp;31, 2008 and 2007 are disclosed in Note 18 of the Notes to Consolidated
Financial Statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our ability to pay cash and stock dividends is subject to limitations under various laws and
regulations and to prudent and sound banking practices. During 2008, we paid a cash dividend on
our common stock each calendar quarter. However, reflecting our financial results and the poor and
weakening economy, we lowered the dollar amount of the cash dividends paid during 2008. During the
first quarter of 2008, our cash dividend was $0.15 per share, but that was lowered to $0.08 per
share during the second quarter and $0.04 per share during the third and fourth quarters. The
reduction of the cash dividends during 2008 had a positive impact on our capital ratios. On
January&nbsp;8, 2009, we declared a $0.04 per common share cash dividend that will be paid on March&nbsp;10,
2009 to shareholders of record on February&nbsp;10, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>LIQUIDITY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Liquidity is measured by our ability to raise funds through deposits, borrowed funds, capital or
cash flow from the repayment of loans and investment securities. These funds are used to fund
loans, meet deposit withdrawals, maintain reserve requirements and operate our company. Liquidity
is primarily achieved through the growth of local and out-of-area deposits and liquid assets such
as securities available for sale, matured securities and federal funds sold. Asset and liability
management is the process of managing the balance sheet to achieve a mix of earning assets and
liabilities that maximizes profitability, while providing adequate liquidity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our liquidity strategy is to fund loan growth with deposits, repurchase agreements and FHLB
advances, and to maintain an adequate level of short- and medium-term investments to meet typical
daily loan and deposit activity. Although deposit and repurchase agreement growth from customers
located in our market areas has historically generally increased, this growth has not been
sufficient to meet our historical substantial loan growth and provide monies for additional
investing activities. To assist in providing the additional needed funds, we have regularly
obtained monies from wholesale funding sources. Wholesale funds, comprised of certificates of
deposit from customers outside of our market areas and advances from the FHLB, totaled $1,414.2
million, or 71.5% of combined deposits and borrowed funds as of December&nbsp;31, 2008, compared to
$1,105.0&nbsp;million, or 58.7% of combined deposits and borrowed funds as of December&nbsp;31, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Although local deposits have historically generally increased as new business, municipal
governmental unit and individual deposit relationships are established and as existing customers
increase the balances in their accounts, the relatively high reliance on wholesale funds will
likely remain. As part of our interest rate risk management strategy, a majority of our wholesale
funds have a fixed rate and mature within one year, reflecting the fact that a majority of our
loans and leases have a floating interest rate tied to either the Prime or LIBOR rates. While this
strategy increases inherent liquidity risk, we believe the increased liquidity risk is sufficiently
mitigated by the benefits derived from an interest rate risk management standpoint. In addition,
we have developed a comprehensive contingency funding plan which we believe further mitigates the
increased liquidity risk.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Wholesale funds are generally a lower all-in cost source of funds when compared to the interest
rates that would have to be offered in the local markets to generate a commensurate level of funds.
Interest rates paid on new out-of-area deposits and FHLB advances have historically been similar
to interest rates paid on new certificates of deposit issued to local customers. In addition, the
overhead costs associated with wholesale funds are considerably less than the overhead costs that
would be incurred to attract and administer a similar level of local deposits, especially if the
estimated costs of a needed expanded branching network were taken into account. We believe the
relatively low overhead costs reflecting our limited branch network mitigate our high reliance on
wholesale funds and resulting relatively low net interest margin.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a member of the Federal Home Loan Bank of Indianapolis, our bank has access to the FHLB advance
borrowing programs. Advances totaled $270.0&nbsp;million as of December&nbsp;31, 2008, compared to $180.0
million outstanding as of December&nbsp;31, 2007. Based on available collateral as of December&nbsp;31,
2008, we could borrow an additional $37.0&nbsp;million. Our bank also has the ability to borrow up to
$30.0&nbsp;million on a daily basis through a correspondent bank using an established unsecured federal
funds purchased line. During 2008, our federal funds purchased position averaged $4.2&nbsp;million,
compared to an average federal funds sold position of $11.4&nbsp;million. Given the volatile market
conditions, during the fourth quarter of 2008 we made the decision to operate with a higher than
normal balance of federal funds sold. It is expected that we will maintain the higher balance of
federal funds sold, likely to average 1.0% to 1.5% of average earning assets, until market
conditions return to more normalized levels. As a result, we expect the use of our federal funds
purchased line of credit, in at least the near future, will be rare, if at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2008 our bank established a line of credit through the Discount Window of the Federal
Reserve Bank of Chicago. Using a substantial majority of our tax-exempt municipal securities as
collateral, at year-end 2008 we could have borrowed up to about $60.0&nbsp;million for terms of 1 to 28
days, or up to about $45.0&nbsp;million for terms of 29 to 90&nbsp;days. We do not plan to regularly access
this line of credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table reflects, as of December&nbsp;31, 2008, significant fixed and determinable
contractual obligations to third parties by payment date, excluding accrued interest:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">One Year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">One to</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Three to</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Over Five</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">or Less</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Three Years</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Five Years</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Years</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deposits without a stated maturity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">235,789,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">235,789,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Certificates of deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,179,405,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,415,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,966,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,363,786,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,413,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,413,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Federal Home Loan Bank advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subordinated debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,990,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,990,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other borrowed money</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,528,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,528,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">329,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">432,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">929,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition to normal loan funding and deposit flow, we must maintain liquidity to meet the demands
of certain unfunded loan commitments and standby letters of credit. At December&nbsp;31, 2008, we had a
total of $379.7&nbsp;million in unfunded loan commitments and $51.4&nbsp;million in unfunded standby letters
of credit. Of the total unfunded loan commitments, $368.7&nbsp;million were commitments available as
lines of credit to be drawn at any time as customers&#146; cash needs vary, and $11.0&nbsp;million were for
loan commitments scheduled to close and become funded within the next twelve months. The level of
commitments to make loans has declined significantly when compared to historical level, primarily
reflecting relatively poor economic conditions. We monitor fluctuations in loan balances and
commitment levels, and include such data in our overall liquidity management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table depicts our loan commitments at the end of the past three years:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial unused lines of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">323,785,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">377,493,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">345,195,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unused lines of credit secured by
1-4 family residential
properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,658,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,083,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,314,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Credit card unused lines of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,413,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,035,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,510,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other consumer unused lines of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,881,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,910,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,197,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments to make loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,959,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,196,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,850,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Standby letters of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,439,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,292,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,241,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">431,135,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">574,009,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">524,307,000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-25<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We monitor our liquidity position and funding strategies on an ongoing basis, but recognize that
unexpected events, economic or market conditions, reduction in earnings performance, declining
capital levels or situations beyond our control could either cause short term or long term
liquidity challenges. While we believe it is unlikely that a funding crisis of any significant
degree is likely to materialize, we have developed a comprehensive contingency funding plan that
provides a framework for meeting both temporary and longer-term liquidity disruptions. Depending
on the particular circumstances of a liquidity situation, possible strategies may include obtaining
funds via one or a combination of the following sources of funds: established lines of credit at
correspondent banks, the FHLB and the Federal Reserve Bank of Chicago, brokered certificate of
deposit market, wholesale securities repurchase markets, issuance of term debt, common or preferred
stock, or sale of securities or other assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>MARKET RISK ANALYSIS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our primary market risk exposure is interest rate risk and, to a lesser extent, liquidity risk.
All of our transactions are denominated in U.S. dollars with no specific foreign exchange exposure.
We have only limited agricultural-related loan assets and therefore have no significant exposure
to changes in commodity prices. Any impact that changes in foreign exchange rates and commodity
prices would have on interest rates is assumed to be insignificant. Interest rate risk is the
exposure of our financial condition to adverse movements in interest rates. We derive our income
primarily from the excess of interest collected on interest-earning assets over the interest paid
on interest-bearing liabilities. The rates of interest we earn on our assets and owe on our
liabilities generally are established contractually for a period of time. Since market interest
rates change over time, we are exposed to lower profitability if we cannot adapt to interest rate
changes. Accepting interest rate risk can be an important source of profitability and shareholder
value; however, excessive levels of interest rate risk could pose a significant threat to our
earnings and capital base. Accordingly, effective risk management that maintains interest rate
risk at prudent levels is essential to our safety and soundness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Evaluating the exposure to changes in interest rates includes assessing both the adequacy of the
process used to control interest rate risk and the quantitative level of exposure. Our interest
rate risk management process seeks to ensure that appropriate policies, procedures, management
information systems and internal controls are in place to maintain interest rate risk at prudent
levels with consistency and continuity. In evaluating the quantitative level of interest rate
risk, we assess the existing and potential future effects of changes in interest rates on our
financial condition, including capital adequacy, earnings, liquidity and asset quality.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We use two interest rate risk measurement techniques. The first, which is commonly referred to as
GAP analysis, measures the difference between the dollar amounts of interest-sensitive assets and
liabilities that will be refinanced or repriced during a given time period. A significant
repricing gap could result in a negative impact to the net interest margin during periods of
changing market interest rates.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-26<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table depicts our GAP position as of December&nbsp;31, 2008 (dollars in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Within</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Three to</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">One to</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">After</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Three</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Twelve</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Five</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Five</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Commercial loans <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">731,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">212,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">702,801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">61,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,708,308</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,985</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Residential real estate loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,776</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Consumer loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,846</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Securities <SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242,787</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal funds sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,950</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,108</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,366</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">834,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">231,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">807,818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">235,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,208,010</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest-bearing checking</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Savings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,943</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Money market accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,886</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Time deposits under $100,000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,939</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Time deposits $100,000 and over</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">377,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">660,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,184,847</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,413</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal Home Loan Bank advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,518</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Noninterest-bearing checking</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,712</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,132</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">708,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">797,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">399,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,033,638</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,372</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total sources of funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">708,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">797,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">399,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,208,010</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net asset (liability)&nbsp;GAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">125,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(566,334</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">408,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">235,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cumulative GAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">125,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(440,990</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(32,553</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">202,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Percent of cumulative GAP to
total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20.0</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.5</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">9.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Floating rate loans that are currently at interest rate ceilings or interest rate
floors are treated as fixed rate loans and are reflected using maturity date and not repricing
frequency.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Mortgage-backed securities are categorized by expected maturities based upon
prepayment trends as of December&nbsp;31, 2008.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The second interest rate risk measurement used is commonly referred to as net interest income
simulation analysis. We believe that this methodology provides a more accurate measurement of
interest rate risk than the GAP analysis, and therefore, it serves as our primary interest rate
risk measurement technique. The simulation model assesses the direction and magnitude of
variations in net interest income resulting from potential changes in market interest rates. Key
assumptions in the model include prepayment speeds on various loan and investment assets; cash
flows and maturities of interest-sensitive assets and liabilities; and changes in market conditions
impacting loan and deposit
volume and pricing. These assumptions are inherently uncertain, subject to fluctuation and
revision in a dynamic environment; therefore, the model cannot precisely estimate net interest
income or exactly predict the impact of  higher or lower interest rates on net interest income.
Actual results will differ from simulated results due to timing, magnitude, and frequency of
interest rate changes and changes in market conditions and our strategies, among other factors.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-27<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted multiple simulations as of December&nbsp;31, 2008, in which it was assumed that changes in
market interest rates occurred ranging from up 200 basis points to down 200 basis points in equal
quarterly instalments over the next twelve months. The following table reflects the suggested
impact on net interest income over the next twelve months in comparison to estimated net interest
income based on our balance sheet structure, including the balances and interest rates associated
with our specific loans, securities, deposits and borrowed funds, as of December&nbsp;31, 2008. The
resulting estimates are well within our policy parameters established to manage and monitor
interest rate risk.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Dollar Change In</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Percent Change In</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Interest Rate Scenario</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Net Interest Income</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Net Interest Income</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest rates down 200 basis points</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,298,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">17.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest rates down 100 basis points</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,935,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">No change in interest rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,352,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest rates up 100 basis points</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,260,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest rates up 200 basis points</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,963,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.4</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The resulting estimates have been significantly impacted by the current interest rate and economic
environment, as adjustments have been made to critical model inputs with regards to traditional
interest rate relationships. This is especially important as it relates to floating rate
commercial loans and brokered certificates of deposit, which comprise a substantial portion of our
balance sheet. As of December&nbsp;31, 2008, the Mercantile Prime Rate is 4.50% as compared to the Wall
Street Journal Prime Rate of 3.25%. Historically, the two indices have been equal; however, we
elected not to reduce the Mercantile Prime Rate in late October and mid-December of 2008 when the
Wall Street Journal Prime Rate declined by 50 and 75 basis points, respectively. In conducting our
simulations at year-end 2008, we have made the assumption that the Mercantile Prime Rate will
remain unchanged until the Wall Street Journal Prime Rate exceeds the Mercantile Prime Rate, at
which time the two indices will remain equal in the increasing interest rate scenarios. We have
also made similar assumptions in regards to our local deposit rates, which in general have not been
reduced since the separation of the Mercantile and Wall Street Journal Prime Rate indices. Also,
brokered certificate of deposit rates have substantially decreased since December of 2008, with
part of the decline attributable to a significant imbalance whereby the supply of available funds
far outweighs the demand from banks looking to raise funds. As a result, we have substantially
limited further reductions in brokered certificate of deposit rates in the declining interest rate
scenarios.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition to changes in interest rates, the level of future net interest income is also dependent
on a number of other variables, including: the growth, composition and absolute levels of loans,
deposits, and other earning assets and interest-bearing liabilities; level of nonperforming assets;
economic and competitive conditions; potential changes in lending, investing, and deposit gathering
strategies; client preferences; and other factors.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-28<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="302"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Board of Directors and Shareholders<BR>
Mercantile Bank Corporation<BR>
Grand Rapids, Michigan
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated balance sheets of Mercantile Bank Corporation as of
December&nbsp;31, 2008 and 2007, and the related consolidated statements of income, changes in
shareholders&#146; equity and cash flows for the years ended December&nbsp;31, 2008 and 2007. These
financial statements are the responsibility of the Company&#146;s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Mercantile Bank Corporation as of December&nbsp;31, 2008
and 2007, and the results of its operations and its cash flows for the years ended December&nbsp;31,
2008 and 2007 in conformity with accounting principles generally accepted in the United States of
America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Mercantile Bank Corporation&#146;s internal control over financial reporting as
of December&nbsp;31, 2008, based on criteria established in <I>Internal Control &#151; Integrated Framework</I>
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)&nbsp;and our
report dated March&nbsp;11, 2009 expressed an unqualified opinion thereon.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ BDO Seidman, LLP
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">BDO Seidman, LLP&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Grand Rapids, Michigan<BR>
March&nbsp;11, 2009
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-29<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Board of Directors and Shareholders<BR>
Mercantile Bank Corporation<BR>
Grand Rapids, Michigan
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated statements of income, changes in shareholders&#146; equity
and cash flows for the year ended December&nbsp;31, 2006. These financial statements are the
responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these
financial statements based on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the results of its operations and its cash flows for the year ended December&nbsp;31,
2006 in conformity with U.S. generally accepted accounting principles.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Crowe Horwath LLP
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">Crowe Horwath LLP&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Grand Rapids, Michigan<BR>
February&nbsp;20, 2007
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-30<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Board of Directors and Shareholders<BR>
Mercantile Bank Corporation<BR>
Grand Rapids, Michigan
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited Mercantile Bank Corporation&#146;s internal control over financial reporting as of
December&nbsp;31, 2008, based on criteria established in <I>Internal Control &#151; Integrated Framework </I>issued
by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).
Mercantile Bank Corporation&#146;s management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Report by Mercantile Bank Corporation&#146;s
Management on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the Company&#146;s internal control over financial reporting based on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A company&#146;s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company&#146;s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2)&nbsp;provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3)&nbsp;provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company&#146;s assets that could have a material effect on the
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, Mercantile Bank Corporation maintained, in all material respects, effective
internal control over financial reporting as of December&nbsp;31, 2008, based on the COSO criteria.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Mercantile Bank Corporation as of
December&nbsp;31, 2008 and 2007, and the related consolidated statements of income, changes in
shareholders&#146; equity and cash flows for the years ended December&nbsp;31, 2008 and 2007, and our report
dated March&nbsp;11, 2009 expressed an unqualified opinion thereon.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ BDO Seidman, LLP
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">BDO Seidman, LLP&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Grand Rapids, Michigan<BR>
March&nbsp;11, 2009
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-31<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">March&nbsp;11, 2009
</DIV>

<DIV align="left">
<A name="303"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">REPORT BY MERCANTILE BANK CORPORATION&#146;S MANAGEMENT<BR>
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Management is responsible for establishing and maintaining an effective system of internal control
over financial reporting presented in conformity with generally accepted accounting principles.
There are inherent limitations in the effectiveness of any system of internal control.
Accordingly, even an effective system of internal control can provide only reasonable assurance
with respect to financial statement preparation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Management assessed the Company&#146;s system of internal control over financial reporting that is
designed to produce reliable financial statements in conformity with generally accepted accounting
principles as of December&nbsp;31, 2008. This assessment was based on criteria for effective internal
control over financial reporting described in <I>Internal Control &#151; Integrated Framework </I>issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment,
management believes that, as of December&nbsp;31, 2008, Mercantile Bank Corporation maintained effective
control over financial reporting presented in conformity with generally accepted accounting
principles based on those criteria.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s independent auditors have issued an audit report on the effectiveness of the
Company&#146;s internal control over financial reporting.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" align="left">Mercantile Bank Corporation<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Michael H. Price
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">Michael H. Price&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">Chairman of the Board, President and Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Charles E. Christmas
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">Charles E. Christmas&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">Senior Vice President &#151; Chief Financial Officer and Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-32<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="305"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
CONSOLIDATED BALANCE SHEETS<BR>
December&nbsp;31, 2008 and 2007
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and due from banks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,754,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29,138,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">292,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal funds sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,950,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,804,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,430,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Securities available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162,669,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,673,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Securities held to maturity (fair value of $65,381,000 at
December&nbsp;31, 2008 and $66,440,000 at December&nbsp;31, 2007)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,437,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,330,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal Home Loan Bank stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,681,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,733,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loans and leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,856,915,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,799,880,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,108,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,814,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loans and leases, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,829,807,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,774,066,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Premises and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,334,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,351,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Bank owned life insurance policies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,462,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,118,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued interest receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,513,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,957,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,303,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,745,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,208,010,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,121,403,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Noninterest-bearing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">110,712,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">133,056,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Interest-bearing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,488,863,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,458,125,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,599,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,591,181,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Securities sold under agreements to repurchase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,413,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,465,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal funds purchased</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,800,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal Home Loan Bank advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subordinated debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,990,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,990,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other borrowed money</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,528,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,013,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued interest and other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,132,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,799,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,033,638,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,943,248,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Preferred stock, no par value; 1,000,000 shares
authorized, none issued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Common stock, no par value; 20,000,000 shares
authorized; 8,593,304 and 8,527,197 shares issued
and outstanding at December&nbsp;31, 2008 and 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,353,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,938,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Retained earnings (deficit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,281,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,948,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,372,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,155,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total liabilities and shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,208,010,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,121,403,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-33<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<A name="306"></A>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
CONSOLIDATED STATEMENTS OF INCOME<BR>
Years ended December&nbsp;31, 2008, 2007 and 2006
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD colspan="13">&nbsp;</TD></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loans and leases, including fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">110,013,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">133,685,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">127,470,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Securities, taxable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,888,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,243,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,557,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Securities, tax-exempt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,960,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,813,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,739,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal funds sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">420,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">482,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,072,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,181,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137,260,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,812,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,221,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,755,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,021,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,493,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,867,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal Home Loan Bank advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,554,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,393,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,476,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,810,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,658,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,863,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,624,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,673,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net interest income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,209,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,557,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,587,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,070,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,775,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net interest income after provision for loan and lease losses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,009,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,487,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,812,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noninterest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Service charges on accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,994,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,610,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,386,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Earnings on bank owned life insurance policies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,727,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,252,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,165,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Credit and debit card fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">745,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">668,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">557,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Letter of credit fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">687,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">613,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">443,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Mortgage banking activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">662,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">464,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">553,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net gain on sales of commercial loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,467,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,263,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,128,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total noninterest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,282,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,870,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,261,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noninterest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Salaries and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,493,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,876,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,983,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Occupancy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,826,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,136,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Furniture and equipment rent, depreciation and maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,980,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,063,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,050,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Nonperforming asset costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,266,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,099,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">430,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Data processing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,394,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,017,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,657,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">FDIC insurance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,890,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">654,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advertising</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">559,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">600,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,718,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,762,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,222,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total noninterest expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,126,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,356,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,262,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income (loss)&nbsp;before federal income tax expense (benefit)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,835,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,001,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,811,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Federal income tax expense (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,876,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,035,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,964,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net income (loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4,959,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,966,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,847,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings (loss)&nbsp;per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-34<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="307"></A>
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS&#146; EQUITY<BR>
Years ended December&nbsp;31, 2008, 2007 and 2006
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Common</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Retained</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Comprehensive</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shareholders&#146;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Earnings (Deficit)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Income (Loss)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Equity</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balances, January&nbsp;1, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">148,533,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,408,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">155,125,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payment of 5% stock dividend</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,014,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,018,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee stock purchase plan, 2,912 shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend reinvestment plan, 2,657 shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock option exercises, 64,971 shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">814,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">814,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock tendered for stock option
exercises, 15,685 shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(585,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(585,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash dividends ($0.48 per share)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,035,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,035,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,847,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,847,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Change in net unrealized loss on
securities available for sale, net of
reclassifications and tax effect</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,153,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balances, December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,223,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,794,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,102,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,915,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payment of 5% stock dividend</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,131,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,135,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee stock purchase plan, 3,966 shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend reinvestment plan, 3,137 shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock option exercises, 52,117 shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">643,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">643,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock tendered for stock option
exercises, 18,291 shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(587,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(587,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash dividends ($0.55 per share)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,677,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,677,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,966,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,966,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Change in net unrealized gain (loss)&nbsp;on
securities available for sale, net of
reclassifications and tax effect</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,371,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,371,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,337,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balances, December&nbsp;31, 2007</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,938,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,948,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,155,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to consolidated financial statements.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-35<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS&#146; EQUITY (Continued)<BR>
Years ended December&nbsp;31, 2008, 2007 and 2006
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Common</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Retained</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Comprehensive</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shareholders&#146;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Earnings (Deficit)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Income (Loss)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Equity</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balances, December&nbsp;31, 2007</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">172,938,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,948,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">269,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">178,155,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee stock purchase plan, 10,904 shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend reinvestment plan, 4,340 shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock option exercises, 2,000 shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock tendered for stock option exercises,
1,123 shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">654,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">654,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash dividends ($0.31 per share)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,355,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,270,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,625,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income (loss):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,959,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,959,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Change in net unrealized gain
on securities available for sale,
net of reclassifications and tax effect</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,795,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,795,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Change in net fair value of interest
rate swaps, net of reclassifications
and tax effect</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,236,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,236,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,928,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balances, December&nbsp;31, 2008</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">172,353,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,281,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">174,372,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to consolidated financial statements.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-36<!-- /Folio -->
</DIV>




<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="308"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>
Years ended December&nbsp;31, 2008, 2007 and 2006
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from operating activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4,959,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,966,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,847,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net income (loss)
to net cash from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,762,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,080,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,887,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Provision for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,070,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,775,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred income tax benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,558,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,103,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(474,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">654,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net gain on sales of commercial loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Proceeds from sales of mortgage loans held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,095,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,911,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,133,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Origination of mortgage loans held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42,810,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(33,408,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,766,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net gain on sales of mortgage loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(506,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(432,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(231,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on sale of foreclosed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,768,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Earnings on bank owned life insurance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,727,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,252,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,165,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net change in:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accrued interest receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,444,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">330,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,013,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(61,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,243,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,658,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accrued interest and other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,667,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,927,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,277,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash from operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,635,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,364,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,833,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from investing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Securities available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(96,292,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,406,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,886,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Securities held to maturity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(978,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,658,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,567,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Federal Home Loan Bank stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,948,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,224,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Maturities, calls and repayments of
securities available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,571,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,969,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,423,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Maturities, calls and repayments of
securities held to maturity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,840,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,221,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,330,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Redemption of Federal Home Loan Bank stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">378,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loan and lease originations and payments, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(86,489,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(66,681,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(189,793,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of premises and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(673,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,513,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,911,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of foreclosed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,777,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,476,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,055,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of bank owned life insurance policies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,617,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,008,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,621,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash for investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(111,809,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(82,824,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(216,592,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from financing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net increase (decrease)&nbsp;in time deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,774,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50,972,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229,843,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net increase (decrease)&nbsp;in all other deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34,380,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,750,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,292,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net increase (decrease)&nbsp;in securities sold under
agreements to repurchase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,052,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,993,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,271,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net increase (decrease)&nbsp;in federal funds purchased</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,800,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from Federal Home Loan Bank advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">266,500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pay-off of Federal Home Loan Bank advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(176,500,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,000,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(115,000,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Increase in structured repurchase agreements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Increase in other borrowed money</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">515,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">697,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">969,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash paid in lieu of fractional shares on stock dividend</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Employee stock purchase plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividend reinvestment plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock option exercises, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,625,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,677,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,035,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash from financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,548,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,510,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203,386,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-37<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)<BR>
Years ended December&nbsp;31, 2008, 2007 and 2006
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net change in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,626,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,950,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,627,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,430,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,380,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,753,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents at end of period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,804,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29,430,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">51,380,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplemental disclosures of cash flow information
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash paid during the year for:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>



<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">80,748,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">87,707,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">67,925,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,730,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,875,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Transfers from loans and leases to foreclosed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,062,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,898,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,129,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to consolidated financial statements.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-38<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="309"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 1 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Principles of Consolidation</U>: The consolidated financial statements include the accounts of
Mercantile Bank Corporation (&#147;Mercantile&#148;) and its subsidiary, Mercantile Bank of Michigan
(&#147;Bank&#148;), and of Mercantile Bank Mortgage Company, LLC (&#147;Mortgage Company&#148;), Mercantile Bank Real
Estate Co., L.L.C. (&#147;Mercantile Real Estate&#148;) and Mercantile Insurance Center, Inc. (&#147;Mercantile
Insurance&#148;), subsidiaries of our bank, after elimination of significant intercompany transactions
and accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We formed a business trust, Mercantile Bank Capital Trust I (&#147;the trust&#148;), in 2004 to issue trust
preferred securities. We issued subordinated debentures to the trust in return for the proceeds
raised from the issuance of the trust preferred securities. In accordance with FASB Interpretation
No.&nbsp;46(R), <I>Consolidation of Variable Interest Entities</I>, the trust is not consolidated, but instead
we report the subordinated debentures issued to the trust as a liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Nature of Operations</U>: Mercantile was incorporated on July&nbsp;15, 1997 to establish and own
the Bank based in Grand Rapids, Michigan. The Bank is a community-based financial institution.
The Bank began operations on December&nbsp;15, 1997. The Bank&#146;s primary deposit products are checking,
savings, and term certificate accounts, and its primary lending products are commercial loans,
commercial leases, residential mortgage loans, and instalment loans. Substantially all loans and
leases are secured by specific items of collateral including business assets, real estate or
consumer assets. Commercial loans and leases are expected to be repaid from cash flow from
operations of businesses. Real estate loans are secured by commercial or residential real estate.
The Bank&#146;s loan accounts are primarily with customers located in the Grand Rapids, Holland,
Lansing, Ann Arbor and Oakland County areas. The Bank&#146;s retail deposits are also from customers
located within those areas. As an alternative source of funds, the Bank has also issued
certificates to depositors outside of the Bank&#146;s primary market areas. Substantially all revenues
are derived from banking products and services and investment securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mercantile Bank Mortgage Company was formed during 2000. A subsidiary of the Bank, Mercantile Bank
Mortgage Company was established to increase the profitability and efficiency of the mortgage loan
operations. Mercantile Bank Mortgage Company initiated business on October&nbsp;24, 2000 via the Bank&#146;s
contribution of most of its residential mortgage loan portfolio and participation interests in
certain commercial mortgage loans. On the same date, the Bank also transferred its residential
mortgage origination function to Mercantile Bank Mortgage Company. On January&nbsp;1, 2004, Mercantile
Bank Mortgage Company was reorganized as Mercantile Bank Mortgage Company, LLC, a limited liability
company, which is 99% owned by the Bank and 1% owned by Mercantile Insurance. Mortgage loans
originated and held by Mercantile Bank Mortgage Company are serviced by the Bank pursuant to a
servicing agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mercantile Insurance was formed during 2002 through the acquisition of an existing shelf insurance
agency. Insurance products are offered through an Agency and Institutions Agreement among
Mercantile Insurance, the Bank and Hub International. The insurance products are marketed through
a central facility operated by the Michigan Bankers Insurance Association, members of which include
the insurance subsidiaries of various Michigan-based financial institutions and Hub International.
Mercantile Insurance receives commissions based upon written premiums produced under the Agency and
Institutions Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mercantile Real Estate was organized on July&nbsp;21, 2003, principally to develop, construct, and own a
facility in downtown Grand Rapids that serves as our bank&#146;s main office and Mercantile&#146;s
headquarters. This facility was placed into service during the second quarter of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mercantile filed an election to become a financial holding company pursuant to Title I of the
Gramm-Leach-Bliley Act and Federal Reserve Board regulations effective March&nbsp;23, 2000.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-39<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 1 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </B>(Continued)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Use of Estimates</U>: To prepare financial statements in conformity with accounting principles
generally accepted in the United States of America, management makes estimates and assumptions
based on available information.
These estimates and assumptions affect the amounts reported in the financial statements and the
disclosures provided, and actual results could differ. The allowance for loan and lease losses and
the fair values of financial instruments are particularly subject to change.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Cash Flow Reporting</U>: Cash and cash equivalents include cash on hand, demand deposits with
other financial institutions, short-term investments (including securities with daily put
provisions) and federal funds sold. Cash flows are reported net for customer loan and deposit
transactions, interest-bearing time deposits with other financial institutions and short-term
borrowings with maturities of 90&nbsp;days or less.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Securities</U>: Debt securities classified as held to maturity are carried at amortized cost
when management has the positive intent and ability to hold them to maturity. Debt securities are
classified as available for sale when they might be sold prior to maturity. Equity securities with
readily determinable fair values are classified as available for sale. Securities available for
sale are carried at fair value, with unrealized holding gains and losses reported in other
comprehensive income, net of tax. Other securities such as Federal Home Loan Bank stock are
carried at cost.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest income includes amortization of purchase premiums and accretion of discounts. Premiums
and discounts on securities are amortized or accreted on the level-yield method without
anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated.
Gains and losses on sales are recorded on the trade date and determined using the specific
identification method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Declines in the fair value of securities below their amortized cost that are other than temporary
are reflected as realized losses. In estimating other-than-temporary losses, management considers:
(1)&nbsp;the length of time and extent that fair value has been less than cost, (2)&nbsp;the financial
condition and near term prospects of the issuer, and (3)&nbsp;our ability and intent to hold the
security for a period sufficient to allow for any anticipated recovery in fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Loans and Leases</U>: Loans and leases that management has the intent and ability to hold for
the foreseeable future or until maturity or payoff are reported at the principal balance
outstanding, net of deferred loan fees and costs and an allowance for loan and lease losses.
Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain
direct origination costs, are deferred and recognized in interest income using the level-yield
method without anticipating prepayments. Net unamortized deferred loan fees amounted to $0.8
million and $0.3&nbsp;million at December&nbsp;31, 2008 and 2007, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest income on commercial loans and leases and mortgage loans is discontinued at the time the
loan is 90&nbsp;days delinquent unless the loan is well-secured and in process of collection. Consumer
and credit card loans are typically charged off no later than when they are 120&nbsp;days past due.
Past due status is based on the contractual terms of the loan or lease. In all cases, loans and
leases are placed on nonaccrual or charged off at an earlier date if collection of principal and
interest is considered doubtful.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All interest accrued but not received for loans and leases placed on nonaccrual is reversed against
interest income. Interest received on such loans and leases is accounted for on the cash-basis or
cost-recovery method, until qualifying for return to accrual. Loans and leases are returned to
accrual status when all the principal and interest amounts contractually due are brought current
and future payments are reasonably assured.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-40<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 1 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </B>(Continued)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Loans Held for Sale</U>: Mortgage loans originated and intended for sale in the secondary
market are carried at the lower of aggregate cost or market, as determined by outstanding
commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance
and charged to earnings. Such loans are sold service released. The balance of loans held for sale
equaled $1.1&nbsp;million and $1.9&nbsp;million as of December&nbsp;31, 2008 and 2007,
respectively. Mortgage banking activities include fees on direct brokered mortgage loans and the
net gain on sale of mortgage loans originated for sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Allowance for Loan and Lease Losses</U>: The allowance for loan and lease losses is a
valuation allowance for probable incurred credit losses. Loan and lease losses are charged against
the allowance when management believes the uncollectibility of a loan or lease balance is
confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the
allowance balance required using past loan and lease loss experience, the nature and volume of the
portfolio, information about specific borrower situations and estimated collateral values, economic
conditions and other factors. Allocations of the allowance may be made for specific loans and
leases, but the entire allowance is available for any loan or lease that, in management&#146;s judgment,
should be charged-off.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A loan or lease is considered impaired when, based on current information and events, it is
probable we will be unable to collect the scheduled payments of principal and interest when due
according to the contractual terms of the loan agreement. Factors considered by management in
determining impairment include payment status, collateral value and the probability of collecting
scheduled principal and interest payments when due. Loans that experience insignificant payment
delays and payment shortfalls generally are not classified as impaired. Management determines the
significance of payment delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan or lease and the borrower, including
the length of delay, the reasons for the delay, the borrower&#146;s prior payment record and the amount
of the shortfall in relation to the principal and interest owed. Impairment is measured on a
loan-by-loan basis for commercial loans and leases and construction loans by either the present
value of expected future cash flows discounted at the loan&#146;s effective interest rate, the loan&#146;s
obtainable market price or the fair value of collateral if the loan is collateral dependent. Large
groups of smaller balance homogeneous loans are collectively evaluated for impairment. We do not
separately identify individual residential and consumer loans for impairment disclosures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Transfers of Financial Assets</U>: Transfers of financial assets are accounted for as sales
when control over the assets has been surrendered. Control over transferred assets is deemed to be
surrendered when: (1)&nbsp;the assets have been isolated from the corporation, (2)&nbsp;the transferee
obtains the right (free of conditions that constrain it from taking advantage of that right) to
pledge or exchange the transferred assets, and (3)&nbsp;the Bank does not maintain effective control
over the transferred assets through an agreement to repurchase them before their maturity. Our
transfers of financial assets are limited to commercial loan participations sold, which were
insignificant for 2008, 2007 and 2006, and the sale of residential mortgage loans in the secondary
market, the extent of which is disclosed in the consolidated statements of cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Premises and Equipment</U>: Land is carried at cost. Premises and equipment are stated at
cost less accumulated depreciation. Buildings and related components are depreciated using the
straight-line method with useful lives ranging from 5 to 33&nbsp;years. Furniture, fixtures and
equipment are depreciated using the straight-line method with useful lives ranging from 3 to 7
years. Maintenance, repairs and minor alterations are charged to current operations as
expenditures occur and major improvements are capitalized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Long-lived Assets</U>: Premises and equipment and other long-lived assets are reviewed for
impairment when events indicate their carrying amount may not be recoverable from future
undiscounted cash flows. If impaired, the assets are recorded at the lower of carrying value or
fair value.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-41<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 1 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </B>(Continued)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Foreclosed Assets:</U> Assets acquired through or in lieu of foreclosure are initially
recorded at the estimated fair value net of estimated selling costs when acquired, establishing a
new cost basis. If fair value declines, a valuation allowance is recorded through expense. Costs
after acquisition are expensed. Foreclosed assets are included in other assets in the accompanying
consolidated balance sheets and totaled $8.1&nbsp;million and $5.9&nbsp;million at December&nbsp;31, 2008 and
2007, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Bank Owned Life Insurance:</U> The Bank has purchased life insurance policies on certain key
officers. Bank owned life insurance is recorded at its cash surrender value, or the amount that
can be realized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Repurchase Agreements</U>: Substantially all repurchase agreement liabilities represent
amounts advanced by various customers. Securities are pledged to cover these liabilities, which
are not covered by federal deposit insurance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Financial Instruments and Loan Commitments</U>: Financial instruments include
off-balance-sheet credit instruments, such as commitments to make loans and commercial letters of
credit, issued to meet customer financing needs. The face amount for these items represents the
exposure to loss, before considering customer collateral or ability to repay. Such financial
instruments are recorded when they are funded. Instruments, such as standby letters of credit that
are considered financial guarantees in accordance with Financial Accounting Standards Board
(&#147;FASB&#148;) Interpretation No.&nbsp;45, are recorded at fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Stock-Based Compensation:</U> Pursuant to Statement of Financial Accounting Standards (&#147;SFAS&#148;)
No.&nbsp;123(R), <I>Share-Based Payment, </I>compensation cost for equity-based awards is measured on the grant
date based on the fair value of the award at that date, and is recognized over the requisite
service period, net of estimated forfeitures. Fair value of stock option awards is estimated using
a closed option valuation (Black-Scholes) model. Fair value of restricted stock awards is based
upon the quoted market price of the common stock on the date of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Income Taxes</U>: Income tax expense is the total of the current year income tax due or
refundable, the change in deferred income tax assets and liabilities, and any adjustments related
to unrecognized tax benefits. Deferred income tax assets and liabilities are recognized for the
tax consequences of temporary differences between the carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates applicable to future years. A valuation allowance,
if needed, reduces deferred income tax assets to the amount expected to be realized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Fair Values of Financial Instruments</U>: Fair values of financial instruments are estimated
using relevant market information and other assumptions. Fair value estimates involve
uncertainties and matters of significant judgment regarding interest rates, credit risk,
prepayments and other factors, especially in the absence of broad markets for particular items.
Changes in assumptions or in market conditions could significantly affect the estimates. The fair
value estimates of existing on- and off-balance sheet financial instruments do not include the
value of anticipated future business or the values of assets and liabilities not considered
financial instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Earnings Per Share</U>: Basic earnings per share is based on weighted average common shares
outstanding during the period exclusive of unvested restricted shares outstanding. Diluted
earnings per share include the dilutive effect of additional potential common shares issuable under
stock options and restricted stock awards and are determined using the treasury stock method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Stock Dividend</U>: Earnings per share are restated for all stock dividends, including the 5%
stock dividends paid on May&nbsp;4, 2007 and May&nbsp;16, 2006. The fair value of shares issued in stock
dividends is transferred from retained earnings to common stock to the extent of available retained
earnings.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-42<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
Years ended December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 1 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </B>(Continued)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Comprehensive Income</U>: Comprehensive income consists of net income and other comprehensive
income. Other comprehensive income includes unrealized gains and losses on securities available
for sale which are also recognized as separate components of equity. For 2008, other comprehensive
income also includes the change in fair value of interest rate swaps as discussed in more detail in
Note 13.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Derivatives</U>: Derivative financial instruments are recognized as assets or liabilities at
fair value. The accounting for changes in the fair value of derivatives depends on the use of the
derivatives and whether the derivatives qualify for hedge accounting. During 2008, our derivatives
consisted of interest rate swap agreements, which were used as part of our asset liability
management to help manage interest rate risk. We do not use derivatives for trading purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Changes in the fair value of derivatives that are designated as a hedge of the variability of cash
flows to be received on the hedged asset or liability and are effective are reported in other
comprehensive income. They are later
reclassified into earnings in the same periods during which the hedged transaction affects earnings
and are included in the line item in which the hedged cash flows are recorded. If hedge accounting
does not apply, changes in the fair value of derivatives are recognized immediately in current
earnings as noninterest income or expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If designated as a hedge, we formally document the relationship between derivatives as hedged
items, as well as the risk-management objective and the strategy for undertaking hedge
transactions. This documentation includes linking cash flow hedges to specific assets on the
balance sheet. If designated as a hedge, we also formally assess, both at the inception and on an
ongoing basis, whether the derivative instruments that are used are highly effective in offsetting
changes in cash flows of the hedged items. Ineffective hedge gains and losses are recognized
immediately in current earnings as noninterest income or expense. We discontinue hedge accounting
when we determine the derivative is no longer effective in offsetting changes in the cash flows of
the hedged item, the derivative is settled or terminates, or treatment of the derivatives as a
hedge is no longer appropriate or intended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Contingencies:</U> Loss contingencies, including claims and legal actions arising in the
ordinary course of business, are recorded as liabilities when the likelihood of loss is probable
and an amount or range of loss can be reasonably estimated. We do not believe there are any such
matters that would have a material effect on the financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Reclassifications</U>: Some items in the prior year financial statements were reclassified to
conform to the current presentation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Operating Segment</U>: While we monitor the revenue streams of the various products and
services offered, the Company manages its business on the basis of one operating segment, banking,
in accordance with the qualitative and quantitative criteria established by SFAS No.&nbsp;131,
<I>Disclosures about Segments of an Enterprise and Related Information</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Adoption of New Accounting Standards</U>: In December&nbsp;2007, the FASB issued SFAS No.&nbsp;141(R),
<I>Business Combinations</I>, to further enhance the accounting and financial reporting related to
business combinations. SFAS No.&nbsp;141(R) establishes principles and requirements for how the
acquirer in a business combination (1)&nbsp;recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree, (2)&nbsp;recognizes and measures the goodwill acquired in the business combination or a gain
from a bargain purchase, and (3)&nbsp;determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of the business combination.
SFAS No.&nbsp;141(R) applies prospectively to business combinations for which the acquisition date is on
or after the beginning of the first annual reporting period beginning on or after December&nbsp;15,
2008. Therefore, the effects of the adoption of SFAS No.&nbsp;141(R) will depend upon the extent and
magnitude of acquisitions after December&nbsp;31, 2008.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-43<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
Years ended December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 1 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </B>(Continued)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2006, the FASB issued SFAS No.&nbsp;157, <I>Fair Value Measurements</I>, which defines fair value,
establishes a framework for measuring fair value and expands disclosures about fair value
measurements. SFAS No.&nbsp;157 applies to other accounting pronouncements that require or permit fair
value measurements, the FASB having previously concluded in those accounting pronouncements that
fair value is the relevant measurement attribute. SFAS No.&nbsp;157 does not require any new fair value
measurements and was originally effective beginning January&nbsp;1, 2008. In February&nbsp;2008, the FASB
issued FASB Staff Position (&#147;FSP&#148;) FAS 157-2. FSP FAS 157-2 allows entities to electively defer
the effective date of SFAS No.&nbsp;157 until January&nbsp;1, 2009 for nonfinancial assets and nonfinancial
liabilities except those items recognized or disclosed at fair value on an annual or more
frequently recurring basis. We will apply the fair value measurement and disclosure provisions of
SFAS No.&nbsp;157 to nonfinancial assets and nonfinancial liabilities effective January&nbsp;1, 2009. The
application of such is not expected to be material to our results of operations or financial
position. On October&nbsp;10, 2008, the FASB issued FSP FAS 157-3 to clarify the application of fair
value measurements of a financial asset when the market for that asset is not active. This
clarifying guidance became effective upon issuance. This new guidance had no effect on our
consolidated results of operations or financial position. See Note 15 for a discussion regarding
the January&nbsp;1, 2008 implementation of SFAS No.&nbsp;157 relating to our financial assets and
liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159, <I>The Fair Value Option for Financial Assets and
Financial Liabilities</I>. This Statement permits entities to choose to measure eligible items at fair
value at specified election dates. For items for which the fair value option has been elected,
unrealized gains and losses are to be reported in earnings at each subsequent reporting date. The
fair value option is irrevocable unless a new election date occurs, may be applied instrument by
instrument, with a few exceptions, and applies only to entire instruments and not to portions of
instruments. SFAS No.&nbsp;159 provides an opportunity to mitigate volatility in reported earnings
caused by measuring related assets and liabilities differently without having to apply complex
hedge accounting. SFAS No.&nbsp;159 was effective beginning January&nbsp;1, 2008. Through December&nbsp;31,
2008, we have not elected the fair value option for any of our financial assets or liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2008, the FASB issued SFAS No.&nbsp;161, <I>Disclosures About Derivative Instruments and Hedging
Activities &#151; an Amendment of FASB Statement No.&nbsp;133</I>. SFAS No.&nbsp;161 expands disclosure requirements
regarding an entity&#146;s derivative instruments and hedging activities. Expanded qualitative
disclosures that will be required under SFAS No.&nbsp;161 include: (1)&nbsp;how and why an entity uses
derivative instruments; (2)&nbsp;how derivative instruments and related hedged items are accounted for
under SFAS No.&nbsp;133, <I>Accounting for Derivative Instruments and Hedging Activities</I>, and related
interpretations; and (3)&nbsp;how derivative instruments and related hedged items affect an entity&#146;s
financial statements. SFAS No.&nbsp;161 is effective beginning January&nbsp;1, 2009. We do not expect SFAS
No.&nbsp;161 to have a material effect on our derivative disclosures upon adoption.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2008, the FASB issued SFAS No.&nbsp;162, <I>The Hierarchy of Generally Accepted Accounting
Principles</I>. SFAS No.&nbsp;162 is intended to improve financial reporting by identifying a consistent
framework, or hierarchy, for selecting accounting principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in conformity with U.S.
generally accepted accounting principles (&#147;GAAP&#148;). SFAS No.&nbsp;162 directs the GAAP hierarchy to the
entity, not the independent auditors, as the entity is responsible for selecting accounting
principles for financial statements that are presented in conformity with GAAP. SFAS No.&nbsp;162
became effective 60&nbsp;days following the Securities and Exchange Commission&#146;s September&nbsp;2008 approval
of the Public Accounting Oversight Board amendments to remove the GAAP hierarchy from the audit
standards. The adoption of SFAS No.&nbsp;162 did not have an impact on our consolidated results of
operations or financial position.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-44<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2 &#151; SECURITIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The amortized cost, fair value of available for sale securities and the related gross unrealized
gains and losses recognized in accumulated other comprehensive income (loss)&nbsp;are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Amortized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">U.S. Government agency
debt obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">61,511,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,264,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(393,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,382,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Mortgage-backed securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,702,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,324,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,026,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Michigan Strategic Fund bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,105,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,105,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Mutual fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,175,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,156,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">159,493,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,588,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(412,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">162,669,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">U.S. Government agency
debt obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">80,129,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">860,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(44,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">80,945,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Mortgage-backed securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,003,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(577,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,619,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Mutual fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,127,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,109,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">136,259,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,053,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(639,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">136,673,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The carrying amount, unrecognized gains and losses, and fair value of securities held to maturity
were as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Municipal general obligation bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56,893,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,133,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(351,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">57,675,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Municipal revenue bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,544,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,706,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">64,437,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,308,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(364,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">65,381,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Municipal general obligation bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">57,668,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,084,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(164,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">58,588,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Municipal revenue bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,662,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,852,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">65,330,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,282,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(172,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">66,440,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</div>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-45<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2 &#151; SECURITIES </B>(Continued)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Securities with unrealized losses at year-end 2008 and 2007, aggregated by investment category and
length of time that individual securities have been in a continuous loss position, are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Less than 12 Months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">12 Months or More</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="5" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Description of Securities</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Loss</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Loss</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Loss</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<tr><td>&nbsp;</td></tr>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. Government agency
debt obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,588,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(387,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,994,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,582,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(393,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mortgage-backed securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michigan Strategic Fund bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mutual fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,156,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,156,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Municipal general
obligation bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,547,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(76,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,852,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(275,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,399,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(351,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Municipal revenue bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">307,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">794,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,101,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24,442,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(464,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,796,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(312,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39,238,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">(776,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. Government agency
debt obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,953,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(44,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,953,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(44,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mortgage-backed securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,241,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,277,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(574,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,518,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(577,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mutual fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,109,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,109,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Municipal general
obligation bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,899,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,001,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(135,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,900,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(164,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Municipal revenue bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">255,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,029,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,284,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,395,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(33,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56,369,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(778,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60,764,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(811,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We evaluate securities for other-than-temporary impairment at least on a quarterly basis.
Consideration is given to the length of time and the extent to which the fair value has been less
than cost, the financial condition and near-term prospects of the issuer, and the intent and
ability we have to retain our investment in the issuer for a period of time sufficient to allow for
any anticipated recovery in fair value. In analyzing an issuer&#146;s financial condition, we may
consider whether the securities are issued by the federal government or its agencies, whether
downgrades by bond rating agencies have occurred and the results of reviews of the issuer&#146;s
financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There were one U.S. Government agency debt obligation, 36 municipal general obligation bonds and
three municipal revenue bonds in a continuous loss position for 12&nbsp;months or more at December&nbsp;31,
2008. At December&nbsp;31, 2008, 67 debt securities and a mutual fund with a fair value totaling $39.2
million have unrealized losses with aggregate depreciation of $0.8&nbsp;million, or 0.3% from the
amortized cost basis of total securities. At December&nbsp;31, 2008, 289 debt securities with a fair
value totaling $161.3&nbsp;million have unrealized gains with aggregate appreciation of $4.9&nbsp;million, or
2.2% from the amortized cost basis of total securities. After we considered whether the securities
were issued by the federal government or its agencies and whether downgrades by bond rating
agencies had occurred, we determined that unrealized losses were due to changing interest rate
environments. As we have the intent and ability to hold debt securities until maturity, or for the
foreseeable future if classified as available for sale, no declines are deemed to be
other-than-temporary.
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</div>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-46<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2 &#151; SECURITIES </B>(Continued)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The amortized cost and fair values of debt securities at year-end 2008, by contractual maturity,
are shown below. The contractual maturity is utilized below for U.S. Government agency debt
obligations and municipal bonds. Expected maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties. Securities not due at a single maturity date,
primarily mortgage backed securities, are shown separately.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The maturities of securities and their weighted average yields at December&nbsp;31, 2008 are also shown
in the following table. The yields for municipal securities are shown at their tax equivalent
yield.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Held-to-Maturity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Available-for-Sale</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Amortized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Yield</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Yield</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<tr><td>&nbsp;</td></tr>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due in one year or less</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.64</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,884,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,914,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">NA</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due from one to five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,457,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,891,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.70</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,934,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,235,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due from five to ten years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,496,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,948,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,637,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,065,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due after ten years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,628,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,940,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,082,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mortgage-backed securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,702,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,026,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michigan Strategic Fund bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,105,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,105,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mutual fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,175,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,156,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.47</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">64,437,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">65,381,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.87</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">159,493,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">162,669,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">During 2008, 2007 and 2006, there were no securities sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At year-end 2008 and 2007, the amortized cost of securities issued by the state of Michigan and all
its political subdivisions totaled $64.4&nbsp;million and $65.3&nbsp;million, with an estimated market value
of $65.4&nbsp;million and $66.4&nbsp;million, respectively. Total securities of any other specific issuer,
other than the U.S. Government and its agencies, did not exceed 10% of shareholders&#146; equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The carrying value of securities that are pledged to secure repurchase agreements and other
deposits was $124.2&nbsp;million and $109.2&nbsp;million at December&nbsp;31, 2008 and 2007, respectively. In
addition, substantially all of our municipal bonds have been pledged to the Discount Window of the
Federal Reserve Bank of Chicago. Investments in Federal Home Loan Bank stock are restricted and
may only be resold, or redeemed by, the issuer.
</DIV>




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</div>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-47<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 3 &#151; LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Year-end loans and leases are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percent</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">December 31, 2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">December 31, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Increase</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Balance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Balance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Decrease)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Real Estate:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Construction and land
development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">263,392,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">263,868,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Secured by 1 &#150; 4
family properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,776,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,517,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Secured by multi-family properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,365,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,951,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Secured by
nonresidential properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">881,350,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">855,872,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">516,201,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">484,645,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,985,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,865,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consumer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,846,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,162,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,856,915,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,799,880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Activity in the allowance for loan and lease losses is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<tr><td>&nbsp;</td></tr>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,814,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21,411,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,527,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,070,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,775,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charge-offs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,594,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,274,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,389,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recoveries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">688,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">607,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">27,108,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,814,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21,411,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<tr><td>&nbsp;</td></tr>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impaired loans and leases were as follows:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Year-end loans with no allocated allowance for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,557,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,842,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Year-end loans with allocated allowance for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,222,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,052,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44,779,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24,894,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amount of the allowance for loan and lease losses allocated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,980,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,237,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Impaired loans and leases for which no allocation to the allowance for loan and leases losses has
been made generally reflect situations whereby the loans and leases have been charged-down to
estimated collateral value. The Bank recognized no interest income on impaired loans during 2008,
2007 or 2006. Average impaired loans were $35.9&nbsp;million, $14.0&nbsp;million and $6.1&nbsp;million during
2008, 2007 and 2006, respectively. Lost interest income on nonaccrual loans totaled $2.1&nbsp;million,
$0.9&nbsp;million and $0.3&nbsp;million in 2008, 2007 and 2006, respectively. Nonperforming loans includes
both smaller balance homogenous loans that are collectively evaluated for impairment and the above
individually classified impaired loans.
</DIV>




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</div>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-48<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 3 &#151; LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES </B>(Continued)
</DIV>



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonperforming loans and leases were as follows:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loans and leases past due 90&nbsp;days or more still accruing interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,358,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">977,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Nonaccrual loans and leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,945,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,832,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">49,303,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29,809,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Concentrations within the loan portfolio were as follows at year-end:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2007</TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Percentage of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Percentage of</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Balance</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Loan Portfolio</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Balance</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Loan Portfolio</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial real estate loans to
lessors of non-residential
buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">489,580,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">26.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">483,210,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">26.8</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 4 &#151; PREMISES AND EQUIPMENT, NET</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Year-end premises and equipment are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<tr><td>&nbsp;</td></tr>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land and improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,538,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,534,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings and leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,888,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,559,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Furniture and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,484,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,164,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,910,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,257,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,576,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,906,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">32,334,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,351,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Depreciation expense in 2008, 2007 and 2006 totaled $2.7&nbsp;million, $2.7&nbsp;million and $2.6&nbsp;million,
respectively.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We entered into a lease arrangement for our banking facility in Ann Arbor, Michigan during 2005,
and for our banking facility in Oakland County during 2007. Rent expense for these facilities
totaled $319,000 and $169,000 during 2008 and 2007, respectively. Minimum rent commitments under
the operating leases were as follows, before considering renewal options that generally are
present:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">329,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">254,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2013</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">929,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</div>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-49<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 5 &#151; DEPOSITS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Deposits at year-end are summarized as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Percent</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">December 31, 2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">December 31, 2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Increase</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Balance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Balance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Decrease)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noninterest-bearing
demand</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">110,712,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">133,056,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16.8</TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest-bearing
checking</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,248,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,491,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Money market</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,886,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,872,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Savings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,943,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,750,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(38.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Time, under $100,000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,991,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,675,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Time, $100,000 and
over</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184,573,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">343,296,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(46.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470,353,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">666,140,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Out-of-area time,
under $100,000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,948,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,703,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Out-of-area time,
$100,000 and over</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,274,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">824,338,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,129,222,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925,041,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,599,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,591,181,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Out-of-area certificates of deposit consist of certificates obtained from depositors outside of the
primary market areas. As of December&nbsp;31, 2008, out-of-area certificates of deposit totaling
$1,101.2&nbsp;million were obtained through deposit brokers, with the remaining $28.0&nbsp;million obtained
directly from the depositors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table depicts the maturity distribution for certificates of deposit at year-end:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">In one year or less</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,179,405,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,030,178,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">In one to two years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,299,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227,492,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">In two to three years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,116,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,231,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">In three to four years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,232,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,777,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">In four to five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,734,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,334,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,363,786,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,321,012,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table depicts the maturity distribution for certificates of deposit with balances of
$100,000 or more at year-end:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<tr><td>&nbsp;</td></tr>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Up to three months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">377,341,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">356,661,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three months to six months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281,568,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">247,322,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Six months to twelve months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">378,899,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,297,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Over twelve months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147,039,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243,354,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr><td>&nbsp;</td></tr>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,184,847,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,167,634,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</div>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-50<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>

<DIV align="LEFT" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 6 &#151; SHORT-TERM BORROWINGS</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information regarding securities sold under agreements to repurchase at year-end is summarized
below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding balance at year-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">94,413,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">97,465,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average interest rate at year-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.96</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.94</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average daily balance during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,149,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,685,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average interest rate during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.04</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.67</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Maximum month-end balance during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105,986,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,881,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Securities sold under agreements to repurchase (repurchase agreements) generally have original
maturities of less than one year. Repurchase agreements are treated as financings and the
obligations to repurchase securities sold are reflected as liabilities. Securities involved with
the repurchase agreements are recorded as assets of the Bank and are held in safekeeping by a
correspondent bank. Repurchase agreements are offered principally to certain large deposit
customers. Repurchase agreements were secured by securities with a market value of $106.5&nbsp;million
and $108.1&nbsp;million at year-end 2008 and 2007, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 7 &#151; FEDERAL HOME LOAN BANK ADVANCES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At year-end, advances from the Federal Home Loan Bank were as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Maturities January&nbsp;2009 through December&nbsp;2013, fixed
rates from
2.95% to 5.30%, averaging 3.79%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">270,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Maturities January&nbsp;2008 through January&nbsp;2012, fixed rates from
4.01% to 5.34%, averaging 4.71%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">270,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">180,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Each advance is payable at its maturity date, and is subject to a prepayment fee if paid prior to
the maturity date. The advances are collateralized by residential mortgage loans, first mortgage
liens on multi-family residential property loans, first mortgage liens on commercial real estate
property loans, and substantially all other assets of the Bank, under a blanket lien arrangement.
Our borrowing line of credit as of December&nbsp;31, 2008 totaled $316.5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Maturities over the next five years are:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">70,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2013</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-51<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 8 &#151; FEDERAL INCOME TAXES</B>
</DIV>




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The consolidated income tax (benefit)&nbsp;provision is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current expense (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,318,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,138,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,438,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,558,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,103,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(474,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax expense (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4,876,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,035,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,964,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Income tax benefit for 2008 was more than, and income tax expense for 2007 and 2006 was less than,
the amount computed by applying the statutory federal income tax rate to income before income
taxes. The reasons for the difference are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,442,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,084,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease)&nbsp;from</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax-exempt interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(818,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(794,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(795,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Bank owned life insurance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(605,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(438,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(408,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Tax (benefit)&nbsp;expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4,876,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,035,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,964,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The net deferred income tax asset recorded includes the following amounts of deferred income tax
assets and liabilities:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,488,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,035,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred loan fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">263,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,584,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,404,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Nonaccrual loan interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">440,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fair value write-downs on foreclosed properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">727,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">633,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,805,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,385,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">907,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,006,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gain on securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,112,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net fair value of interest rate swaps</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">666,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">674,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">713,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,359,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,864,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred income tax asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,446,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,521,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS No.&nbsp;109, <I>Accounting for Income Taxes</I>, requires that companies assess whether a valuation
allowance should be established against their deferred tax assets based on the consideration of all
available evidence using a &#147;more likely than not&#148; standard. In accordance with SFAS No.&nbsp;109, we
reviewed our deferred tax assets and determined that no valuation allowance was necessary at year
end 2008 or 2007. Despite the loss in 2008 and the challenging economic environment, we are in a
cumulative income position, have a history of strong earnings, are well-capitalized, and have
cautiously optimistic expectations regarding future taxable income. In making such judgments,
significant weight is given to evidence that can be objectively verified. In making decisions
regarding any valuation allowance, we consider both positive and negative evidence and analyze
changes in near-term market conditions as well as other factors which may impact future operating
results. The deferred tax assets will be analyzed quarterly for changes affecting realizability,
and there can be no guarantee that a valuation allowance will not be necessary in future periods.<BR>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-52<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 8 &#151; FEDERAL INCOME TAXES </B>(Continued)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We adopted the provisions of FASB Interpretation No.&nbsp;48 (&#147;FIN 48&#148;), <I>Accounting for Uncertainty in
Income Taxes</I>, on January&nbsp;1, 2007. The adoption of FIN 48 had no affect on the financial
statements. We had no recognized tax benefits at any time during 2008 or 2007 and do not
anticipate any significant increase in unrecognized tax benefits during 2009. Should the accrual
of any interest or penalties relative to unrecognized tax benefits be necessary, it is our policy
to record such accruals in our income tax accounts; no such accruals existed at any time during
2008 or 2007. We file U.S. federal income tax returns which are subject to examination for all
years after 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 9 &#151; STOCK-BASED COMPENSATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Stock-based compensation plans are used to provide directors and employees with an increased
incentive to contribute to the long-term performance and growth of Mercantile, to align the
interests of directors and employees with the interests of Mercantile&#146;s shareholders through the
opportunity for increased stock ownership and to attract and retain directors and employees. From
1997 through 2005, stock option grants were provided to directors and certain employees through
several stock option plans, including the 1997 Employee Stock Option Plan, 2000 Employee Stock
Option Plan, 2004 Employee Stock Option Plan and Independent Director Stock Option Plan. During
the past three years, stock option and restricted stock grants were provided to certain employees
through the Stock Incentive Plan of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under our 1997 Employee Stock Option Plan, 2000 Employee Stock Option Plan and 2004 Employee Stock
Option Plan, stock options granted to employees were granted at the market price on the date of
grant, generally fully vest after one year and expire ten years from the date of grant. Stock
options granted to non-executive officers during 2005 vested about three weeks after being granted.
Under our Independent Director Stock Option Plan, stock options granted to non-employee directors
are at 125% of the market price on the date of grant, fully vest after five years and expire ten
years from the date of grant. The Stock Incentive Plan of 2006 replaced all of our outstanding
stock option plans for stock options not previously granted. Under the Stock Incentive Plan of
2006, incentive awards may include, but are not limited to, stock options, restricted stock, stock
appreciation rights and stock awards. Incentive awards that are stock options or stock
appreciation rights are granted with an exercise price not less than the closing price of
Mercantile stock on the date of grant, or for stock options granted in 2006 or 2007, the day before
the date of grant, if the closing price was higher on the day before the date of grant. Price,
vesting and expiration date parameters are determined by Mercantile&#146;s Compensation Committee on a
grant-by-grant basis. Generally, the stock options granted to employees during the past three
years fully vest after two years and expire after seven years. The restricted stock awards granted
to certain employees during the past three years fully vest after four years. No payments were
required from employees for the restricted stock awards. At year-end 2008, there were
approximately 396,000 shares authorized for future incentive awards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2008, there was $0.2&nbsp;million of total unrecognized compensation cost related to
unvested stock options granted under our various stock-based compensation plans. This unrecognized
compensation cost is expected to be recognized over a weighted-average period of 1.5&nbsp;years. As of
December&nbsp;31, 2008, there was $1.1&nbsp;million of total unrecognized compensation cost related to
unvested restricted stock granted under our Stock Incentive Plan of 2006. The compensation cost is
expected to be recognized over a period of 3.0&nbsp;years.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-53<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 9 &#151; STOCK-BASED COMPENSATION </B>(Continued)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A summary of restricted stock activity is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested at
beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD colspan="1" align="right">NA</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37.94</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">NA</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,724</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,585</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">NA</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested at
end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37.94</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A summary of stock option activity is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at
beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">271,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">288,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">330,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20.77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37.94</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(52,117</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(64,971</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited or expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,781</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,189</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,312</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.95</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at
end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">271,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">288,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24.07</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercisable
at year-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">181,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21.55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of each stock option award is estimated on the date of grant using a closed option
valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected
volatilities are based on historical volatilities on our common stock. Historical data is used to
estimate stock option expense and post-vesting termination behavior. The expected term of stock
options granted is based on historical data and represents the period of time that stock options
granted are expected to be outstanding, which takes into account that the stock options are not
transferable. The risk-free interest rate for the expected term of the stock option is based on
the U.S. Treasury yield curve in effect at the time of the stock option grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of stock options granted was determined using the following weighted-average
assumptions as of grant date:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.40</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.60</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected option life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">5 Years</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">5 Years</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">5 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected stock price volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">44</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">26</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">26</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-54<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 9 &#151; STOCK-BASED COMPENSATION </B>(Continued)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Options outstanding at year-end 2008 were as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Exercisable</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted Average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Range of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Remaining</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Average</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Contractual</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Exercise</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Prices</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Life</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Price</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$4.00 - $8.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">6.9 Years</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD colspan="1" align="right">NA</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$8.01 - $12.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">1.6 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$12.01 - $16.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">2.8 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.89</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$16.01 - $20.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">5.2 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$20.01 - $24.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">3.8 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$24.01 - $28.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">4.8 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$32.01 - $36.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">6.3 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$36.01 - $40.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,856</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">4.9 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37.94</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$40.01 - $44.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">5.8 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">NA</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at year end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">5.3 Years</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25.23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The weighted-average remaining contractual life of the 198,694 stock options exercisable as of
December&nbsp;31, 2008 was 4.6&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information related to options outstanding at year-end 2008, 2007 and 2006 were as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minimum exercise price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.09</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Maximum exercise price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average remaining option term</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">5.3 Years</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">5.9 Years</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">6.1 Years</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information related to stock option grants and exercises during 2008, 2007 and 2006 follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Aggregate intrinsic value of stock options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,019,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,616,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash received from stock option exercises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit realized from stock option exercises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average per share fair value of stock
options granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.44</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The closing price of our stock on December&nbsp;31, 2008 was below the exercise price of all of our
stock option grants. Therefore, the aggregate intrinsic value of all stock options outstanding and
exercisable at December&nbsp;31, 2008 was $0.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Shares issued as a result of the exercise of stock option grants have been authorized and unissued
shares.
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-55<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 10 &#151; RELATED PARTIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain directors and executive officers of the Bank, including their immediate families and
companies in which they are principal owners, were loan customers of the Bank. At year-end 2008
and 2007, the Bank had $17.7&nbsp;million and $19.1&nbsp;million in loan commitments to directors and
executive officers, of which $14.1&nbsp;million and $14.7&nbsp;million were outstanding at year-end 2008 and
2007, respectively, as reflected in the following table:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,719,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,797,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">New loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,777,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,551,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,406,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,629,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ending balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,090,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,719,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Related party deposits and repurchase agreements totaled $12.7&nbsp;million and $14.2&nbsp;million at
year-end 2008 and 2007, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 11 &#151; COMMITMENTS AND OFF-BALANCE-SHEET RISK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are a party to financial instruments with off-balance sheet risk in the normal course of
business to meet the financing needs of our customers. These financial instruments include
commitments to extend credit and standby letters of credit. Loan commitments to extend credit are
agreements to lend to a customer as long as there is no violation of any condition established in
the contract. Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These instruments involve, to varying degrees, elements of credit risk in excess of the amount
recognized, if any, in the balance sheet. Our maximum exposure to loan loss in the event of
nonperformance by the other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual
notional amount of those instruments. We use the same credit policies in making commitments and
conditional obligations as we do for on-balance sheet instruments. Collateral, such as accounts
receivable, securities, inventory, and property and equipment is generally obtained based on
management&#146;s credit assessment of the borrower. If required, estimated loss exposure resulting
from these instruments is expensed and recorded as a liability. The balance of the liability
account related to loan commitments was $0.5&nbsp;million at year-end 2008 and 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At year-end 2008 and 2007, the rates on existing off-balance sheet instruments were substantially
equivalent to current market rates, considering the underlying credit standing of the
counterparties.
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-56<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 11 &#151; COMMITMENTS AND OFF-BALANCE-SHEET RISK </B>(Continued)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our maximum exposure to credit losses for loan commitments and standby letters of credit
outstanding at year-end was as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial unused lines of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">323,785,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">377,493,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unused lines of credit secured by 1 &#151; 4 family
residential properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,658,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,083,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Credit card unused lines of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,413,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,035,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other consumer unused lines of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,881,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,910,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments to make loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,959,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,196,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Standby letters of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,439,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,292,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">431,135,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">574,009,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Commitments to make loans generally reflect our binding obligations to existing and prospective
customers to extend credit, including line of credit facilities secured by accounts receivable and
inventory, and term debt secured by either real estate or equipment. In most instances, line of
credit facilities are for a one year term and are at a floating rate tied to the prime rate. For
term debt secured by real estate, customers are generally offered a floating rate tied to the prime
rate and a fixed rate currently ranging from 5.00% to 6.50%. These credit facilities generally
balloon within five years, with payments based on amortizations ranging from 10 to 25&nbsp;years. For
term debt secured by non-real estate collateral, customers are generally offered a floating rate
tied to the prime rate and a fixed rate currently ranging from 5.00% to 7.00%. These credit
facilities generally mature and fully amortize within five years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain of our commercial loan customers have entered into interest rate swap agreements directly
with our correspondent banks. To assist our commercial loan customers in these transactions, and
to encourage our correspondent banks to enter into the interest rate swap transactions with minimal
credit underwriting analyses on their part, we have entered into risk participation agreements with
the correspondent banks whereby we agree to make payments to the correspondent banks owed by our
commercial loan customers under the interest rate swap agreement in the event that our commercial
loan customers do not make the payments. We are not a party to the interest rate swap agreements
under these arrangements. As of December&nbsp;31, 2008, the total notional amount of the underlying
interest rate swap agreements was $61.8&nbsp;million, with a net fair value from our commercial loan
customers&#146; perspective of negative $8.0&nbsp;million. Payments made during 2008 in regards to the risk
participation agreements totaled $16,000; however, we believe the affected customer will reimburse
us for such payments and therefore we have accrued no liability for these payments or such
potential future payments. These risk participation agreements are considered financial guarantees
in accordance with FASB Interpretation No.&nbsp;45 and are therefore recorded as liabilities at fair
value, generally equal to the fees collected at the time of their execution. These liabilities are
accreted into income during the term of the interest rate swap agreements, generally ranging
from four to fifteen years. This liability totaled $0.3&nbsp;million and $0.1&nbsp;million at December&nbsp;31,
2008 and 2007, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following instruments are considered financial guarantees under FASB Interpretation No.&nbsp;45.
These instruments are carried at fair value.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Standby letters of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">51,439,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">282,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">81,292,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">357,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We were required to have $0.3&nbsp;million of cash on hand or on deposit with the Federal Reserve Bank
of Chicago to meet regulatory reserve and clearing requirements at year-end 2008 and 2007. These
balances do not earn interest.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-57<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 12 &#151; BENEFIT PLANS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have a 401(k) benefit plan that covers substantially all of our employees. Our 2008, 2007 and
2006 matching 401(k) contributions charged to expense were $781,000, $747,000 and $674,000,
respectively. The percent of our matching contributions to the 401(k) is determined annually by
the Board of Directors. The 401(k) benefit plan allows employee contributions up to 15% of their
compensation, which are matched at 100% of the first 5% of the compensation contributed up to a
maximum matching contribution for the 2008 plan year of $11,500. Matching contributions are
immediately vested.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have a deferred compensation plan in which all persons serving on the Board of Directors may
defer all or portions of their annual retainer and meeting fees, with distributions to be paid upon
termination of service as a director or specific dates selected by the director. The deferred
amounts are categorized on our financial statements as other borrowed money. The deferred balances
are paid interest at a rate equal to the Wall Street Journal Prime Rate, adjusted at the beginning
of each calendar quarter. Interest expense for the plan during 2008, 2007 and 2006 was $89,000,
$109,000 and $81,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have a non-qualified deferred compensation program in which selected officers may defer all or
portions of salary and bonus payments. The deferred amounts are categorized on our financial
statements as other borrowed money. The deferred balances are paid interest at a rate equal to the
Wall Street Journal Prime Rate, adjusted at the beginning of each calendar quarter. Interest
expense for the plan during 2008, 2007 and 2006 was $140,000, $190,000 and 148,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Mercantile Bank Corporation Employee Stock Purchase Plan of 2002 (&#147;Stock Purchase Plan&#148;) is a
non-compensatory plan intended to encourage full- and part-time employees of Mercantile and its
subsidiaries to promote our best interests and to align employees&#146; interests with the interests of
our shareholders by permitting employees to purchase shares of our common stock through regular
payroll deductions. Shares are purchased on the last business day of each calendar quarter at a
price equal to the average, rounded to the nearest whole cent, of the highest and lowest sales
prices of our common stock reported on The Nasdaq Stock Market. Originally, 25,000 shares of
common stock may be issued under the Stock Purchase Plan; however, the number of shares has been
and may continue to be adjusted in the future to reflect stock dividends and other changes in our
capitalization. The numbers of shares issued under the Stock Purchase Plan totaled 10,904 and
3,966 in 2008 and 2007, respectively. As of December&nbsp;31, 2008, there were 5,989 shares available
under the Stock Purchase Plan. Effective February&nbsp;26, 2009, the Stock Purchase Plan was amended to
increase the number of shares that can be issued under the plan to 55,000 shares, subject to
adjustments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 13 &#151; HEDGING ACTIVITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our interest rate risk policy includes guidelines for measuring and monitoring interest rate risk.
Within these guidelines, parameters have been established for maximum fluctuations in net interest
income. Possible fluctuations are measured and monitored using net interest income simulation.
Our policy provides for the use of certain derivative instruments and hedging activities to aid in
managing interest rate risk to within policy parameters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A majority of our assets are comprised of commercial loans on which the interest rates are
variable, while a majority of our liabilities are comprised of fixed rate certificates of deposit
and FHLB advances. Due to this repricing mismatch, we may periodically enter into derivative
financial instruments to mitigate the exposure in cash flows resulting from changes in interest
rates.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-58<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 13 &#151; HEDGING ACTIVITIES </B>(Continued)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2008, we entered into several interest rate swaps with an aggregate notional amount of
$275.0&nbsp;million. The interest rate swaps qualified as cash flow hedges that converted the variable
rate cash inflows on certain of our prime-based commercial loans to a fixed rate of interest. The
interest rate swaps paid interest to us at stated fixed rates and required that we make interest
payments based on the average of the Wall Street Journal Prime Rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;30, 2008, we terminated all of our interest rate swaps. The termination coincided with
our decision to not lower our prime rate in association with the Federal Open Market Committee&#146;s
reduction of the targeted federal funds rate by 50 basis points announced on October&nbsp;29, 2008.
Virtually all of our prime-based commercial floating rate loans are tied to the Mercantile Bank
Prime Rate, while our interest rate swaps utilized the Wall Street Journal Prime Rate. The
resulting difference negatively impacted the effectiveness of our interest rate swaps, so we
believed it was prudent to terminate them. The aggregate fair value of the interest rate swaps on
October&nbsp;30, 2008 was $2.4&nbsp;million, which will be accreted into interest income on loans and leases
during the upcoming periods based on the original term of the interest rate swaps as follows:
$765,000 during the first quarter of 2009; $525,000 during the second quarter 2009; $250,000 during
the third and fourth quarters 2009; and $100,000 during the first quarter 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 14 &#151; FAIR VALUES OF FINANCIAL INSTRUMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Carrying amount and estimated fair values of financial instruments were as follows at year-end:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2007</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Values</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Values</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Values</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Values</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Financial assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,804,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,804,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,430,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,430,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Securities available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162,669,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162,669,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,673,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,673,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Securities held to maturity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,437,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,381,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,330,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,440,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal Home Loan Bank stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,681,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,681,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,733,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,733,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loans, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,829,807,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,872,141,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,774,066,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,777,883,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Bank owned life insurance policies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,462,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,462,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,118,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,118,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued interest receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,513,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,513,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,957,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,957,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Financial liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,599,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,610,953,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,591,181,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,585,921,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Securities sold under agreements
to repurchase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,413,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,413,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,465,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,465,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal funds purchased</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,800,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,800,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal Home Loan Bank advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">274,847,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180,303,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subordinated debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,990,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,990,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,678,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued interest payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,245,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,245,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,130,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,130,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-59<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 14 &#151; FAIR VALUES OF FINANCIAL INSTRUMENTS </B>(Continued)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Carrying amount is the estimated fair value for cash and cash equivalents, Federal Home Loan Bank
stock, accrued interest receivable and payable, bank owned life insurance policies, demand
deposits, securities sold under agreements to repurchase, and variable rate loans and deposits that
reprice frequently and fully. Security fair values are based on market prices or dealer quotes,
and if no such information is available, on the rate and term of the security and information about
the issuer. For fixed rate loans and deposits and for variable rate loans and deposits with
infrequent repricing or repricing limits, fair value is based on discounted cash flows using
current market rates applied to the estimated life and credit risk. Fair value of subordinated
debentures and Federal Home Loan Bank advances is based on current rates for similar financing.
Fair value of off balance sheet items is estimated to be nominal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Current accounting pronouncements require disclosure of the estimated fair value of financial
instruments. Effective January&nbsp;1, 2008, fair value is defined in accordance with SFAS No.&nbsp;157 as
disclosed in Note 15. Given the current market conditions, a portion of our loan portfolio is not
readily marketable and market prices do not exist. We have not attempted to market our loans to
potential buyers, if any exist, to determine the fair value of those instruments in accordance with
the definition of SFAS No.&nbsp;157. Since negotiated prices in illiquid markets depends upon the then
present motivations of the buyer and seller, it is reasonable to assume that actual sales prices
could vary widely from any estimate of fair value made without the benefit of negotiations.
Additionally, changes in market interest rates can dramatically impact the value of financial
instruments in a short period of time. Accordingly, the fair value measurements for loans included
in the table above are unlikely to represent the instruments&#146; liquidation values.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 15 &#151; FAIR VALUE MEASUREMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective January&nbsp;1, 2008, we implemented SFAS No.&nbsp;157 relating to our financial assets and
liabilities. SFAS No.&nbsp;157 defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants. A fair
value measurement assumes that the transaction to sell the asset or transfer the liability occurs
in the principal market for the asset or liability, or in the absence of a principal market, the
most advantageous market for the asset or liability. The price of the principal (or most
advantageous) market used to measure the fair value of the asset or liability shall not be adjusted
for transaction costs. An orderly transaction is a transaction that assumes exposure to the market
for a period prior to the measurement date to allow for marketing activities that are usual and
customary for transactions involving such assets and liabilities; it is not a forced transaction.
Market participants are buyers and sellers in the principal market that are (i)&nbsp;independent, (ii)
knowledgeable, (iii)&nbsp;able to transact and (iv)&nbsp;willing to transact.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS No.&nbsp;157 requires the use of valuation techniques that are consistent with the market approach,
the income approach and/or the cost approach. The market approach uses prices and other relevant
information generated by market transactions involving identical or comparable assets and
liabilities. The income approach uses valuation techniques to convert future amounts, such as cash
flows or earnings, to a single present amount on a discounted basis. The cost approach is based on
the amount that currently would be required to replace the service capacity of an asset
(replacement cost). Valuation techniques should be consistently applied. Inputs to valuation
techniques refer to the assumptions that market participants would use in pricing the asset or
liability. Inputs may be observable, meaning those that reflect the assumptions market
participants would use in pricing the asset or liability developed based on market data obtained
from independent sources, or unobservable, meaning those that reflect the reporting entity&#146;s own
assumptions about the assumptions market participants would use in pricing the asset or liability
developed based on the best information available in the circumstances. In that regard, SFAS No.
157 establishes a fair value hierarchy for valuation inputs that gives the highest priority to
quoted prices in active markets for identical assets or liabilities and the lowest priority to
unobservable inputs. The fair value hierarchy is as follows:
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-60<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 15 &#151; FAIR VALUE MEASUREMENTS </B>(Continued)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Level 1: Quoted prices (unadjusted)&nbsp;for identical assets or liabilities in active markets that we
have the ability to access as of the measurement date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for
similar assets or liabilities in active markets; quoted prices for identical or similar assets or
liabilities in markets that are not active; or other inputs that are observable or can be derived
from or corroborated by observable market data by correlation or other means.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Level 3: Significant unobservable inputs that reflect our own assumptions about the assumptions
that market participants would use in pricing an asset or liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following is a description of our valuation methodologies used to measure and disclose the fair
values of our financial assets and liabilities on a recurring or nonrecurring basis:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Securities available for sale. </I>Securities available for sale are recorded at fair value on a
recurring basis. Fair value measurement is based on quoted prices, if available. If quoted prices
are not available, fair values are measured using independent pricing models. Level 2 securities
include U.S. Government Agency bonds and mortgage-backed securities issued or guaranteed by U.S.
Government Agencies. We have no Level 1 or 3 securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Securities held to maturity. </I>Securities held to maturity are carried at amortized cost when we have
the positive intent and ability to hold them to maturity. The fair value of held to maturity
securities, as disclosed in the accompanying consolidated financial statements, is based on quoted
prices, if available. If quoted prices are not available, fair values are measured using
independent pricing models.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Mortgage loans held for sale. </I>Mortgage loans held for sale are carried at the lower of cost or fair
value and are measured on a nonrecurring basis. Fair value is based on independent quoted market
prices, where applicable, or the prices for other mortgage whole loans with similar
characteristics. As of December&nbsp;31, 2008, we determined that the fair value of our mortgage loans
held for sale was similar to the cost; therefore, we carried the $1.1&nbsp;million of such loans at cost
so they are not included in the nonrecurring table below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Loans and leases. </I>We do not record loans and leases at fair value on a recurring basis. However,
from time to time, we record nonrecurring fair value adjustments to collateral dependent loans and
leases to reflect partial write-downs or specific reserves that are based on the observable market
price or current estimated value of the collateral. These loans and leases are reported in the
nonrecurring table below at initial recognition of impairment and on an ongoing basis until
recovery or charge-off. At time of foreclosure or repossession, foreclosed and repossessed assets
are adjusted to fair value less costs to sell upon transfer of the loans and leases to foreclosed
and repossessed assets, establishing a new cost basis. At that time, they are reported in our fair
value disclosures related to nonfinancial assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Derivatives. </I>For interest rate swaps, we measure fair value utilizing models that use primarily
market observable inputs, such as yield curves and option volatilities, and accordingly, are
classified as Level 2. We had no interest rate swap contracts outstanding as of December&nbsp;31, 2008.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-61<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 15 &#151; FAIR VALUE MEASUREMENTS </B>(Continued)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Assets and Liabilities Measured at Fair Value on a Recurring Basi</I>s

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The balances of assets and liabilities measured at fair value on a recurring basis as of December
31, 2008 are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Quoted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Prices in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Active</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Significant</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Markets for</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Significant</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Identical</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Observable</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unobservable</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Assets</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Inputs</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Inputs</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Level 1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Level 2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Level 3)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Securities available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">162,669,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">162,669,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">162,669,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">162,669,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We had no assets or liabilities measured at Level 3 during 2008; however, in previous Form 10-Q
filings we indicated that our securities available for sale were measured at Level 1. We recently
re-reviewed documentation provided to us by our third party securities pricing vendor and
determined that the measurement tools utilized to determine the fair value of our securities more
closely reflects a Level 2 categorization than Level 1 as previously reported. There have been no
significant measurement methodology changes employed by our securities pricing vendor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The balances of assets and liabilities measured at fair value on a nonrecurring basis as of
December&nbsp;31, 2008 and related gains (losses)&nbsp;during 2008 are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Quoted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Price in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Active</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Significant</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Markets for</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Significant</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Identical</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Observable</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unobservable</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Assets</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Inputs</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Inputs</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gains</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Level 1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Level 2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Level 3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Losses)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impaired loans <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,197,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,197,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(16,710,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,197,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,197,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(16,710,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Represents carrying value and related write-downs and specific reserves for
which adjustments are based on the estimated value of the property.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Nonfinancial Assets and Liabilities Subject to FSP FAS 157-2 Deferral Provisions</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We will apply the fair value measurement and disclosure provisions of SFAS No.&nbsp;157 effective on
January&nbsp;1, 2009 to nonfinancial assets and liabilities measured on a nonrecurring basis. We
measure the fair value of the following on a nonrecurring basis: (1)&nbsp;long-lived assets and (2)
foreclosed and repossessed assets.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-62<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 16 &#151; EARNINGS (LOSS)&nbsp;PER SHARE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The factors used in the earnings (loss)&nbsp;per share computation follow:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4,959,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,966,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,847,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Weighted average common shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,470,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,453,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,403,163</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic earnings (loss)&nbsp;per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4,959,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,966,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,847,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Weighted average common shares outstanding for
basic earnings (loss)&nbsp;per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,470,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,453,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,403,163</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Add: Dilutive effects of share-based awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,809</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Average shares and dilutive potential
common shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,470,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,497,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,517,972</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted earnings (loss)&nbsp;per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Share-based awards for 438,444, 196,256 and 31,940 shares of common stock were not considered in
computing diluted earnings per common share for 2008, 2007 and 2006, respectively, because they
were antidilutive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 17 &#151; SUBORDINATED DEBENTURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The trust, a business trust formed by the company, was incorporated in 2004 for the purpose of
issuing Series&nbsp;A and Series&nbsp;B Preferred Securities. On September&nbsp;16, 2004, the trust sold the
Series&nbsp;A Preferred Securities in a private sale for $16.0&nbsp;million, and also sold $495,000 of Series
A Common Securities to Mercantile. The proceeds of the Series&nbsp;A Preferred Securities and the
Series&nbsp;A Common Securities were used by the trust to purchase $16,495,000 of Series&nbsp;A Floating Rate
Notes that were issued by Mercantile on September&nbsp;16, 2004. Mercantile used the proceeds of the
Series&nbsp;A Floating Rate Notes to finance the redemption on September&nbsp;17, 2004 of the $16.0&nbsp;million
of 9.60% Cumulative Preferred Securities issued in 1999 by MBWM Capital Trust I. On December&nbsp;10,
2004, the trust sold the Series&nbsp;B Preferred Securities in a private sale for $16.0&nbsp;million, and
also sold $495,000 of Series&nbsp;B Common Securities to Mercantile. The proceeds of the Series&nbsp;B
Preferred Securities and the Series&nbsp;B Common Securities were used by the trust to purchase
$16,495,000 of Series&nbsp;B Floating Rate Notes that were issued by Mercantile on December&nbsp;10, 2004.
Substantially all of the net proceeds of the Series&nbsp;B Floating Rate Notes were contributed to our
bank as capital to provide support for asset growth, fund investments in loans and securities and
for general corporate purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The only significant assets of the trust are the Series&nbsp;A and Series&nbsp;B Floating Rate Notes, and the
only significant liabilities of the trust are the Series&nbsp;A and Series&nbsp;B Preferred Securities. The
Series&nbsp;A and Series&nbsp;B Floating Rate Notes are categorized on our consolidated balance sheets as
subordinated debentures and the interest expense is recorded on our consolidated statements of
income under interest expense on long-term borrowings.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-63<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 18 &#151; REGULATORY MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mercantile and the Bank are subject to regulatory capital requirements administered by federal
banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve
quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under
regulatory accounting practices. Capital amounts and classifications are also subject to
qualitative judgments by regulators about components, risk weightings, and other factors, and the
regulators can lower classifications in certain cases. Failure to meet various capital
requirements can initiate regulatory action that could have a direct material effect on the
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The prompt corrective action regulations provide five classifications, including well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized, and critically
undercapitalized, although these terms are not used to represent overall financial condition. If
an institution is not well capitalized, regulatory approval is required to accept brokered
deposits. Subject to limited exceptions, no institution may make a capital distribution if, after
making the distribution, it would be undercapitalized. If an institution is undercapitalized, it
is subject to being closely monitored by its principal federal regulator, its asset growth and
expansion are restricted, and plans for capital restoration are required. In addition, further
specific types of restrictions may be imposed on the institution at the discretion of the federal
regulator. At year-end 2008 and 2007, the most recent regulatory notifications categorized the
Bank as well capitalized under the regulatory framework for prompt corrective action. There are no
conditions or events since that notification that we believe has changed the Bank&#146;s category.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At year end, actual capital levels (in thousands) and minimum required levels for Mercantile and
the Bank were:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Minimum Required</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">to be Well</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Minimum Required</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Capitalized Under</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">for Capital</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Prompt Corrective</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Actual</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Adequacy Purposes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Action Regulations</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Ratio</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Ratio</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Ratio</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total capital (to risk
weighted assets)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Consolidated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">229,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">10.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">167,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD colspan="1" nowrap align="right">NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">NA</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Bank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">10.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tier 1 capital (to risk
weighted assets)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Consolidated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">NA</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Bank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tier 1 capital (to average
assets)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Consolidated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">NA</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Bank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

 <DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-64<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 18 &#151; REGULATORY MATTERS </B>(Continued)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Minimum Required</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">to be Well</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Minimum Required</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Capitalized Under</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">for Capital</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Prompt Corrective</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Actual</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Adequacy Purposes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Action Regulations</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Ratio</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Ratio</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Ratio</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total capital (to risk
weighted assets)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Consolidated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">235,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">11.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">165,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD colspan="1" nowrap align="right">NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">NA</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Bank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">232,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">10.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tier 1 capital (to risk
weighted assets)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Consolidated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">NA</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Bank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tier 1 capital (to average
assets)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Consolidated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">NA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">NA</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Bank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Federal and state banking laws and regulations place certain restrictions on the amount of
dividends the Bank can transfer to Mercantile and on the capital levels that must be maintained.
At year-end 2008, under the most restrictive of these regulations (to remain well capitalized), the
Bank could distribute approximately $12.0&nbsp;million to Mercantile as dividends without prior
regulatory approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The capital levels as of year-end 2008 and 2007 include $32.0&nbsp;million of trust preferred securities
issued by the trust in September&nbsp;2004 and December&nbsp;2004 subject to certain limitations. Under
applicable Federal Reserve guidelines, the trust preferred securities constitute a restricted core
capital element. The guidelines provide that the aggregate amount of restricted core elements that
may be included in Tier 1 capital must not exceed 25% of the sum of all core capital elements,
including restricted core capital elements, net of goodwill less any associated deferred tax
liability. At year-end 2008 and 2007, all $32.0&nbsp;million of the trust preferred securities were
included as Tier 1 capital of Mercantile.
</DIV>

 <DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-65<!-- /Folio -->
</DIV>










<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 19 &#151; OTHER COMPREHENSIVE INCOME</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other comprehensive income components, other than net income (loss), and related taxes were as
follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized holding gains on
available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,761,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,110,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">470,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in net fair value of interest rate swaps</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,876,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reclassification adjustments for gains
later recognized in income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(974,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net unrealized gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,663,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,110,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax effect of unrealized holding gains
on available-for-sale securities and
unrealized gain on interest rate swaps</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,973,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(739,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(164,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax effect of reclassification adjustments for
gains later recognized in income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,031,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,371,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">306,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accumulated other comprehensive income, net of tax, consists of a net unrealized gain on
available-for-sale securities of $2,064,000 and a fair value of interest rate swaps of $1,236,000
at December&nbsp;31, 2008. At December&nbsp;31, 2007, accumulated other comprehensive income, net of tax,
consists of a net unrealized gain on available-for-sale securities totaling $269,000.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 20 &#151; QUARTERLY FINANCIAL DATA (UNAUDITED)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Earnings (Loss) per Share</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Income</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Income</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Income (Loss)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Basic</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Diluted</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">First quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">31,955,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,383,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,738,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.44</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.44</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Second quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,139,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,592,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,612,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.31</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.31</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Third quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,843,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,728,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,079,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fourth quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,134,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,505,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">First quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,025,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,484,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,283,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Second quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,084,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,948,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,221,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Third quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,779,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,051,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,367,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fourth quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,293,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,074,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">First quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">31,099,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,099,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,929,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Second quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,746,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,646,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,111,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Third quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,675,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,547,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,202,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fourth quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,740,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,295,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,605,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.54</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued)
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-66<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 21 &#151; MERCANTILE BANK CORPORATION (PARENT COMPANY ONLY)</B><BR>
&nbsp;<B>CONDENSED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Following are condensed parent company only financial statements:
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONDENSED BALANCE SHEETS
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">407,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,137,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment in bank subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203,153,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206,890,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,396,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,373,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">207,956,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">212,400,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">594,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,255,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subordinated debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,990,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,990,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,372,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,155,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total liabilities and shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">207,956,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">212,400,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONDENSED STATEMENTS OF INCOME
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends from subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,739,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,291,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,440,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,739,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,310,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,513,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,914,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,512,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,429,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,431,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,835,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,917,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,345,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,347,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,346,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income before income tax benefit and equity in
undistributed net income (loss)&nbsp;of subsidiary</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">394,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,963,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,167,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Federal income tax benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,417,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,783,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,392,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity in undistributed net income (loss)&nbsp;of subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,770,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,220,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,288,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net income (loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4,959,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,966,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,847,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-67<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">MERCANTILE BANK CORPORATION<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December&nbsp;31, 2008 and 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 21 &#151; MERCANTILE BANK CORPORATION (PARENT COMPANY ONLY)</B><BR>
&nbsp;<B>CONDENSED FINANCIAL STATEMENTS </B>(Continued)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONDENSED STATEMENTS OF CASH FLOWS
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from operating activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4,959,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,966,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,847,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net income (loss)&nbsp;to net
cash from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Equity in undistributed (income)&nbsp;loss of subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,770,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,220,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,288,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">654,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Change in other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,023,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(483,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Change in other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(661,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">648,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash from operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">779,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,272,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,883,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from investing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net capital investment into subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash from investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from financing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock option exercises, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Employee stock purchase plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividend reinvestment plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,625,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,677,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,035,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fractional shares paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash for financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,509,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,458,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,605,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net change in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,730,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(186,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">278,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,137,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,323,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,045,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents at end of period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">407,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,137,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,323,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-68<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on March&nbsp;12, 2009.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">MERCANTILE BANK CORPORATION<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Michael H. Price
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Michael H. Price&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chairman of the Board, President and Chief<BR>
Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities indicated
on March&nbsp;12, 2009.
</DIV>

<DIV align="center">
  <TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
    <!-- Begin Table Head -->
    <TR valign="bottom">
      <TD width="40%">&nbsp;</TD>
      <TD width="5%">&nbsp;</TD>
      <TD width="50%">&nbsp;</TD>
      <TD width="5%">&nbsp;</TD>
    </TR>
    <!-- End Table Head -->
    <!-- Begin Table Body -->
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">/s/ Betty S. Burton </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp; </TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR style="font-size: 1px">
      <TD valign="top" style="border-top: 1px solid #000000">
        <DIV style="margin-left:0px; text-indent:-0px">&nbsp; </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">Betty S. Burton, Director
        </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <!-- Blank Space -->
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">/s/ David M. Cassard </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR style="font-size: 1px">
      <TD valign="top" style="border-top: 1px solid #000000">
        <DIV style="margin-left:0px; text-indent:-0px">&nbsp; </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">David M. Cassard, Director
        </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <!-- Blank Space -->
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">/s/ Edward J. Clark </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR style="font-size: 1px">
      <TD valign="top" style="border-top: 1px solid #000000">
        <DIV style="margin-left:0px; text-indent:-0px">&nbsp; </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">Edward J. Clark, Director
        </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <!-- Blank Space -->
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">/s/ Peter A. Cordes </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR style="font-size: 1px">
      <TD valign="top" style="border-top: 1px solid #000000">
        <DIV style="margin-left:0px; text-indent:-0px">&nbsp; </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">Peter A. Cordes, Director
        </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <!-- Blank Space -->
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">/s/ Doyle A. Hayes </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR style="font-size: 1px">
      <TD valign="top" style="border-top: 1px solid #000000">
        <DIV style="margin-left:0px; text-indent:-0px">&nbsp; </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">Doyle A. Hayes, Director
        </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <!-- Blank Space -->
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">/s/ David M. Hecht </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR style="font-size: 1px">
      <TD valign="top" style="border-top: 1px solid #000000">
        <DIV style="margin-left:0px; text-indent:-0px">&nbsp; </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">David M. Hecht, Director
        </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <!-- Blank Space -->
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">/s/ Susan K. Jones </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR style="font-size: 1px">
      <TD valign="top" style="border-top: 1px solid #000000">
        <DIV style="margin-left:0px; text-indent:-0px">&nbsp; </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">Susan K. Jones, Director
        </DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <!-- Blank Space -->
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top">
        <DIV style="margin-left:0px; text-indent:-0px">/s/ Lawrence W. Larsen</DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <TR valign="bottom">
      <TD valign="top" style="border-top: 1px solid #000000">
        <DIV style="margin-left:0px; text-indent:-0px"> Lawrence W. Larsen, Director</DIV>
      </TD>
      <TD>&nbsp;</TD>
      <TD align="left" valign="top">&nbsp;</TD>
      <TD>&nbsp;</TD>
    </TR>
    <!-- End Table Body -->
  </TABLE>
  <table style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
    <!-- Begin Table Head -->
    <tr valign="bottom">
      <td width="40%">&nbsp;</td>
      <td width="15%">&nbsp;</td>
      <td width="45%">&nbsp;</td>
    </tr>
    <!-- End Table Head -->
    <!-- Begin Table Body -->
    <tr valign="bottom">
      <td align="left" valign="top">/s/ Calvin D. Murdock </td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr style="font-size: 1px">
      <td align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">Calvin D. Murdock, Director</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <!-- Blank Space -->
      <td align="left" valign="top">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">/s/ Michael H. Price</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr style="font-size: 1px">
      <td align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">Michael H. Price, Chairman of the Board, President
        and Chief Executive Officer (principal executive officer)</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <!-- Blank Space -->
      <td align="left" valign="top">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">/s/ Merle J. Prins</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr style="font-size: 1px">
      <td align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">Merle J. Prins, Director</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <!-- Blank Space -->
      <td align="left" valign="top">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">/s/ Timothy O. Schad</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr style="font-size: 1px">
      <td align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">Timothy O. Schad, Director</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <!-- Blank Space -->
      <td align="left" valign="top">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">/s/ Dale J. Visser</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr style="font-size: 1px">
      <td align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">Dale J. Visser, Director</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <!-- Blank Space -->
      <td align="left" valign="top">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">/s/ Donald Williams, Sr.</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr style="font-size: 1px">
      <td align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">Donald Williams, Sr., Director</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <!-- Blank Space -->
      <td align="left" valign="top">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">/s/ Charles E. Christmas</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr style="font-size: 1px">
      <td align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">Charles E. Christmas, Senior Vice President,
        Chief Financial Officer and Treasurer (principal financial and accounting
        officer)</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <!-- Blank Space -->
      <td align="left" valign="top">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align="left" valign="top">&nbsp;</td>
      <td>&nbsp;</td>
      <td align="left" valign="top">&nbsp;</td>
    </tr>
    <!-- End Table Body -->
  </table>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT INDEX</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT NO.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT DESCRIPTION</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Our Articles of Incorporation are incorporated by reference to
exhibit 3.1 of our Form&nbsp;10-Q for the quarter ended June&nbsp;30,
2008</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Our Amended and Restated Bylaws dated as of January&nbsp;16, 2003
are incorporated by reference to exhibit 3.2 of our
Registration Statement on Form&nbsp;S-3 (Commission File No.
333-103376) that became effective on February&nbsp;21, 2003</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Our 1997 Employee Stock Option Plan is incorporated by
reference to exhibit 10.1 of our Registration Statement on
Form&nbsp;SB-2 (Commission File No.&nbsp;333-33081) that became
effective on October&nbsp;23, 1997 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Our 2000 Employee Stock Option Plan is incorporated by
reference to exhibit 10.14 of our Form&nbsp;10-K for the year ended
December&nbsp;31, 2000 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Our 2004 Employee Stock Option Plan is incorporated by
reference to exhibit 10.1 of our Form&nbsp;10-Q for the quarter
ended September&nbsp;30, 2004 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Stock Option Agreement for options under the 2004
Employee Stock Option Plan is incorporated by reference to
exhibit 10.2 of our Form&nbsp;10-Q for the quarter ended September
30, 2004 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Our Independent Director Stock Option Plan is incorporated by
reference to exhibit 10.26 of our Form&nbsp;10-K for the year ended
December&nbsp;31, 2002 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Stock Option Agreement for options under the
Independent Director Stock Option Plan is incorporated by
reference to exhibit 10.1 of our Form&nbsp;8-K filed October&nbsp;22,
2004 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mercantile Bank of Michigan Amended and Restated Deferred
Compensation Plan for Members of the Board of Directors dated
June&nbsp;29, 2006 is incorporated by reference to exhibit 10.9 of
our Form&nbsp;10-K for the year ended December&nbsp;31, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment dated October&nbsp;25, 2007 to the Mercantile Bank
of Michigan Amended and Restated Deferred Compensation Plan
for Members of the Board of Directors dated June&nbsp;29, 2006 is
incorporated by reference to exhibit 10.10 of our Form&nbsp;10-K
for the year ended December&nbsp;31, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment dated October&nbsp;23, 2008 to the Mercantile Bank
of Michigan Amended and Restated Deferred Compensation Plan
for Members of the Board of Directors dated June&nbsp;29, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement between Fiserv Solutions, Inc. and our bank dated
September&nbsp;10, 1997, is incorporated by reference to exhibit
10.3 of our Registration Statement on Form&nbsp;SB-2 (Commission
File No.&nbsp;333-33081) that became effective on October&nbsp;23, 1997</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Extension Agreement of Data Processing Contract between Fiserv
Solutions, Inc. and our bank dated May&nbsp;12, 2000 extending the
agreement between Fiserv Solutions, Inc. and our bank dated
September&nbsp;10, 1997, is incorporated by reference to exhibit
10.15 of our Form&nbsp;10-K for the year ended December&nbsp;31, 2000</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT NO.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT DESCRIPTION</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Extension Agreement of Data Processing Contract between Fiserv
Solutions, Inc. and our bank dated November&nbsp;21, 2002 extending
the agreement between Fiserv Solutions, Inc. and our bank
dated September&nbsp;10, 1997, is incorporated by reference to
exhibit 10.5 of our Form&nbsp;10-K for the year ended December&nbsp;31,
2002</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Extension Agreement of Data Processing Contract between Fiserv
Solutions, Inc. and our bank dated December&nbsp;20, 2006 extending
the agreements between Fiserv Solutions, Inc. and our bank
dated September&nbsp;10, 1997 and November&nbsp;21, 2002 is incorporated
by reference to exhibit 10.14 of our Form&nbsp;10-K for the year
ended December&nbsp;31, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Employment Agreement dated as of October
18, 2001, among the company, our bank and Gerald R. Johnson,
Jr., is incorporated by reference to exhibit 10.21 of our Form
10-K for the year ended December&nbsp;31, 2001 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.15
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Employment Agreement dated as of October
18, 2001, among the company, our bank and Michael H. Price, is
incorporated by reference to exhibit 10.22 of our Form&nbsp;10-K
for the year ended December&nbsp;31, 2001 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated as of October&nbsp;18, 2001, among the
company, our bank and Robert B. Kaminski, Jr., is incorporated
by reference to exhibit 10.23 of our Form&nbsp;10-K for the year
ended December&nbsp;31, 2001 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.17
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated as of October&nbsp;18, 2001, among the
company, our bank and Charles E. Christmas, is incorporated by
reference to exhibit 10.23 of our Form&nbsp;10-K for the year ended
December&nbsp;31, 2001 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Employment Agreement dated as of October&nbsp;17,
2002, among the company, our bank and Gerald R. Johnson, Jr.,
is incorporated by reference to exhibit 10.21 of our Form&nbsp;10-K
for the year ended December&nbsp;31, 2002 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.19
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Employment Agreement dated as of October&nbsp;17,
2002, among the company, our bank and Michael H. Price, is
incorporated by reference to exhibit 10.22 of our Form&nbsp;10-K
for the year ended December&nbsp;31, 2002 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.20
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Employment Agreement dated as of October&nbsp;17,
2002, among the company, our bank and Robert B. Kaminski, Jr.,
is incorporated by reference to exhibit 10.23 of our Form&nbsp;10-K
for the year ended December&nbsp;31, 2002 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Employment Agreement dated as of October&nbsp;17,
2002, among the company, our bank and Charles E. Christmas, is
incorporated by reference to exhibit 10.24 of our Form&nbsp;10-K
for the year ended December&nbsp;31, 2002 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.22
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Employment Agreement dated as of October&nbsp;28,
2004, among the company, our bank and Robert B. Kaminski, Jr.,
is incorporated by reference to exhibit 10.21 of our Form&nbsp;10-K
for the year ended December&nbsp;31, 2004 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.23
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Junior Subordinated Indenture between us and Wilmington Trust
Company dated September&nbsp;16, 2004 providing for the issuance of
the Series&nbsp;A and Series&nbsp;B Floating Rate Junior Subordinated
Notes due 2034 is incorporated by reference to exhibit 10.1 of
our Form&nbsp;8-K filed December&nbsp;15, 2004</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Trust Agreement dated September&nbsp;16, 2004
for Mercantile Bank Capital Trust I is incorporated by
reference to exhibit 10.2 of our Form&nbsp;8-K filed December&nbsp;15,
2004</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT NO.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT DESCRIPTION</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.25
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Placement Agreement between us, Mercantile Bank Capital Trust
I, and SunTrust Capital Markets, Inc. dated September&nbsp;16, 2004
is incorporated by reference to exhibit 10.3 of our Form&nbsp;8-K
filed December&nbsp;15, 2004</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.26
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Guarantee Agreement dated September&nbsp;16, 2004 between
Mercantile as Guarantor and Wilmington Trust Company as
Guarantee Trustee is incorporated by reference to exhibit 10.4
of our Form&nbsp;8-K filed December&nbsp;15, 2004</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.27
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Agreement Amending Stock Option Agreement, dated
November&nbsp;17, 2005 issued under our 2004 Employee Stock Option
Plan, is incorporated by reference to exhibit 10.1 of our Form
8-K filed December&nbsp;14, 2005 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.28
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment to Employment Agreement dated as of November
17, 2005, among the company, our bank and Gerald R. Johnson,
Jr. is incorporated by reference to exhibit 10.28 of our Form
10-K for the year ended December&nbsp;31, 2005 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.29
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment to Employment Agreement dated as of November
17, 2005, among the company, our bank and Michael H. Price is
incorporated by reference to exhibit 10.29 of our Form&nbsp;10-K
for the year ended December&nbsp;31, 2005 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.30
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Amendment to Employment Agreement dated as of November
17, 2005, among the company, our bank and Robert B. Kaminski,
Jr. is incorporated by reference to exhibit 10.30 of our Form
10-K for the year ended December&nbsp;31, 2005 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.31
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment to Employment Agreement dated as of November
17, 2005, among the company, our bank and Charles E. Christmas
is incorporated by reference to exhibit 10.31 of our Form&nbsp;10-K
for the year ended December&nbsp;31, 2005 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.32
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Mercantile Bank of Michigan Amended and Restated
Executive Deferred Compensation Agreement dated November&nbsp;18,
2006, that has been entered into between our bank and each of
Gerald R. Johnson, Jr., Michael H. Price, Robert B. Kaminski,
Jr., Charles E. Christmas, and certain other officers of our
bank is incorporated by reference to exhibit 10.34 of our Form
10-K for the year ended December&nbsp;31, 2007 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.33
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of First Amendment to the Mercantile Bank of Michigan
Executive Deferred Compensation Agreement dated November&nbsp;18,
2006, that has been entered into between our bank and each of
Gerald R. Johnson, Jr., Michael H. Price, Robert B. Kaminski,
Jr., Charles E. Christmas, and certain other officers of our
bank, dated October&nbsp;25, 2007 is incorporated by reference to
exhibit 10.35 of our Form&nbsp;10-K for the year ended December&nbsp;31,
2007 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.34
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Second Amendment to the Mercantile Bank of Michigan
Executive Deferred Compensation Agreement date November&nbsp;18,
2006, that has been entered into between our bank and each of
Michael H. Price, Robert B. Kaminski, Charles E. Christmas,
and certain other officers of our bank, dated October&nbsp;23, 2008
*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.35
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Mercantile Bank of Michigan Split Dollar Agreement
that has been entered into between our bank and each of Gerald
R. Johnson, Jr., Michael H. Price, Robert B. Kaminski, Jr.,
Charles E. Christmas, and certain other officers of our bank
is incorporated by reference to exhibit 10.33 of our Form&nbsp;10-K
for the year ended December&nbsp;31, 2005 *</TD>
</TR>
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</TABLE>
</DIV>


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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT NO.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT DESCRIPTION</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.36
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director Fee Summary *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.37
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease Agreement between our bank and The Conlin Company dated
July&nbsp;12, 2005 for our Ann Arbor, Michigan office is
incorporated by reference to exhibit 10.36 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2005</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.38
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stock Incentive Plan of 2006 is incorporated by reference to
Appendix&nbsp;A of our proxy statement for our April&nbsp;27, 2006 annual
meeting of shareholders that was filed with the Securities and
Exchange Commission *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.39
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment and Restatement of Stock Incentive Plan of 2006 dated
November&nbsp;18, 2008 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.40
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Notice of Grant of Incentive Stock Option and Stock
Option Agreement for incentive stock options granted in 2006
under our Stock Incentive Plan of 2006 is incorporated by
reference to exhibit 10.1 of our Form&nbsp;8-K filed November&nbsp;22,
2006 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.41
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Notice of Grant of Incentive Stock Option and Stock
Option Agreement for incentive stock options granted after 2006
under our Stock Incentive Plan of 2006 is incorporated by
reference to exhibit 10.41 of our Form&nbsp;10-K for the year ended
December&nbsp;31, 2007 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.42
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Restricted Stock Award Agreement Notification of Award
and Terms and Conditions of Award for restricted stock granted
in 2006 under our Stock Incentive Plan of 2006 is incorporated
by reference to exhibit 10.2 of our Form&nbsp;8-K filed November&nbsp;22,
2006 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.43
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Restricted Stock Award Agreement Notification of Award
and Terms and Conditions of Award for restricted stock granted
after 2006 under our Stock Incentive Plan of 2006 is
incorporated by reference to exhibit 10.43 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2007 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.44
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Officer Bonus Plan for 2007 is incorporated by
reference to exhibit 10.1 of our Form&nbsp;8-K filed January&nbsp;29,
2007 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.45
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retirement Agreement by and among Mercantile Bank Corporation,
Mercantile Bank of Michigan and Gerald R. Johnson, Jr. is
incorporated by reference to exhibit 10.1 of our Form&nbsp;8-K filed
May&nbsp;25, 2007 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.46
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Additional Release of Claims Pursuant to Retirement Agreement
Dated May&nbsp;24, 2007 by and among Mercantile Bank Corporation,
Mercantile Bank of Michigan and Gerald R. Johnson, Jr. is
incorporated by reference to exhibit 10.1 of our Form&nbsp;10-Q for
the quarter ended September&nbsp;30, 2007 *</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.47
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mercantile Bank Corporation Employee Stock Purchase Plan of 2002</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.48
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease Agreement between our bank and CD Partners LLC dated
October&nbsp;2, 2007 for our Oakland County, Michigan office is
incorporated by reference to exhibit 10.47 of our Form&nbsp;10-K for
the year ended December&nbsp;31, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries of the company</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of BDO Seidman, LLP</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Crowe Horwath LLP</TD>
</TR>
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</TABLE>
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<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT NO.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">EXHIBIT DESCRIPTION</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">31
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rule&nbsp;13a-14(a) Certifications</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;1350 Chief Executive Officer Certification</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;1350 Chief Financial Officer Certification</TD>
</TR>
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    <TD width="96"></TD>
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    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Management contract or compensatory plan</TD>
</TR>

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<TYPE>EX-10.9
<SEQUENCE>2
<FILENAME>k47547exv10w9.htm
<DESCRIPTION>EX-10.9
<TEXT>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT 10.9</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">SECOND AMENDMENT TO THE<BR>
MERCANTILE BANK OF MICHIGAN<BR>
AMENDED AND RESTATED<BR>
DEFERRED COMPENSATION PLAN<BR>
FOR MEMBERS OF THE BOARD OF DIRECTORS<BR>
DATED JUNE 29, 2006<BR>
AND AMENDED OCTOBER 25, 2007

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS SECOND AMENDMENT is adopted this 23rd day of October, 2008, by Mercantile Bank of
Michigan, a state-chartered commercial bank located in Grand Rapids, Michigan (the &#147;Company&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company executed the Amended and Restated Deferred Compensation Plan for Members of the
Board of Directors on June&nbsp;29, 2006, effective as of January&nbsp;1, 2005, and executed a First
Amendment on October&nbsp;25, 2007 (the &#147;Agreement&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby amends the Plan for the purpose of providing each Director with an
election of a specified time distribution. Therefore, the following changes shall be made:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Section&nbsp;1.8 of the Plan shall be deleted in its entirety and replaced by the following:</I>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.8</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<U>Deferral Election Form</U>&#148; means each form established from time to time by the Plan
Administrator that the Director completes, signs and returns to the Plan Administrator to
designate the amount of Deferrals and, with respect to Deferrals made on and after January&nbsp;1,
2009, to elect the time and form of a Specified Time Distribution.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following Sections&nbsp;1.17a and 1.17b shall be added to the Plan immediately following
Section&nbsp;1.17:</I>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.17a</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<U>Specified Time Distribution</U>&#148; means a distribution made at a specified time pursuant
to a Director&#146;s election on a Specified Time Distribution Election Form or a Deferral Election
Form.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.17b</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<U>Specified Time Distribution Election Form</U>&#148; means the form established from time to
time by the Plan Administrator that the Director completes, signs and returns to the Plan
Administrator to designate the time and form of a Specified Time Distribution.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following Sections&nbsp;4.0, 4.0.1, 4.0.1.1, 4.0.1.2, 4.0.2, 4.0.2.1 and 4.0.2.2 shall be added
to the Plan immediately before Section&nbsp;4.1:</I>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">4.0</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Specified Time Distribution</U><I>. </I>If a Director elects a Specified Time Distribution, the
Company shall distribute to the Director the benefit described in this Section&nbsp;4.0.
Notwithstanding the prior sentence, if a distribution is payable under Section&nbsp;4.1 or 5.1,
then the distribution will be made under Section&nbsp;4.1 or 5.1, as applicable, and not under this
Section&nbsp;4.0.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.0.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Deferrals Made on or Before December&nbsp;31, 2008</U>. For Deferrals made on
or before December&nbsp;31, 2008, a Director may elect on or before November&nbsp;30, 2008, a
distribution under this Section&nbsp;4.0.1. This election may be made notwithstanding any
restriction to the contrary in Section&nbsp;4.4.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.0.1.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Amount of Benefit</U><I>. </I>The benefit under this Section&nbsp;4.0.1 is the
portion of the Deferral Account balance as of December&nbsp;31, 2008 elected by the
Director on the Specified Time Distribution Election Form.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.0.1.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Distribution of Benefit</U>. The Company shall pay the benefit under
this Section&nbsp;4.0.1 to the Director, commencing on or after March&nbsp;1, 2009, as
elected by the Director on the Specified Time Distribution Election Form.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.0.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Deferrals Made on or After January&nbsp;1, 2009</U>. For Deferrals made on or
after January&nbsp;1, 2009, a Director may elect a distribution under this Section&nbsp;4.0.2.
This election shall be made for each Plan Year and shall only apply to the Deferrals
made for that Plan Year.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.0.2.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Amount of Benefit</U><I>. </I>The benefit under this Section&nbsp;4.0.2 is the
portion or all of the Deferrals for the Plan Year beginning on or after January
1, 2009 for which a Specified Time Distribution election is made, together with
accrued interest, as elected by the Director on the Deferral Election Forms.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.0.2.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Distribution of Benefit</U>. The Company shall pay the benefit under
this Section&nbsp;4.0.2 to the Director, commencing on or after the earliest date
permitted by Code Section&nbsp;409A, as elected by the Director on the Deferral
Election Forms.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Section&nbsp;4.4 of the Plan shall be deleted in its entirety and replaced by the following:</I>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">4.4</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Change in Form or Timing of Distributions</U>. For distribution of benefits under this
Article&nbsp;4, a Director may elect to delay the timing or change the form of distributions by
submitting the appropriate Distribution Election Form(s) or Specified Time Distribution
Election Form(s) to the Plan Administrator. Any such election:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>may not accelerate the time or schedule of any distribution,
except as provided in Code Section&nbsp;409A;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>must, for benefits distributable under Section&nbsp;4.0, be made at
least twelve (12)&nbsp;months prior to the first scheduled distribution;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>must, for benefits distributable under Sections&nbsp;4.0 and 4.1,
delay the commencement of distributions for a minimum of five (5)&nbsp;years from
the date the first distribution was originally scheduled to be made;
<U>and</U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>must take effect not less than twelve (12)&nbsp;months after the
amendment is made.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The restrictions in paragraphs (a)&nbsp;through (d)&nbsp;above do not apply to a Director&#146;s election to
receive a distribution under Section&nbsp;4.0.1.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For purposes of any change under this Section&nbsp;4.4, a distribution paid in the form of installments
shall be deemed to be a single payment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS OF THE ABOVE</B>, the Company hereby adopts this Second Amendment.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">MERCANTILE BANK OF MICHIGAN:<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left"> /s/ Lonna Wiersma
</TD>

    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD colspan="1" align="left">Title&nbsp;</TD>
    <TD nowrap colspan="1" align="left">SVP &#151; Human Resource Director&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Specified Time Distribution Election &#151; For Amount Deferred<BR>
On or Before December&nbsp;31, 2008</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>THIS ELECTION MUST BE MADE BY NOVEMBER 30, 2008</B>

</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD><!-- VRule -->
    <TD width="0%">&nbsp;</TD>
    <TD width="94%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

    <TD colspan="6" align="center" valign="top" style="border-top: 1px solid #000000; border-right: 1px solid #000000; border-left: 1px solid #000000"><B>Amount of Specified Time Distribution</B></TD>
</TR>

<TR valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD colspan="4" valign="top" align="left" style="border-top: 1px solid #000000"><BR><B>&#091;Initial and Complete One&#093;</B><BR><BR></TD>
    <TD width="1%" style="border-top: 1px solid #000000; border-right: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD valign="top" style="border-top: 0px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">A.&#95;&#95;&#95;
</DIV></TD>
    <TD style="border-right: 0px solid #000000; border-top: 0px solid #000000">&nbsp;</TD>
    <TD style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">I elect to receive &#95;&#95;&#95;% of my Deferral Account balance as<BR> of December
31, 2008, in the manner described below<BR> commencing on
&#95;&#95;&#95;&#95;&#95;&#95;&#95; (<I>must be on or after March&nbsp;1, 2009)</I>.</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom"><!-- Blank Space -->
    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD valign="top" style="border-top: 0px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD style="border-right: 0px solid #000000; border-top: 0px solid #000000">&nbsp;</TD>
    <TD style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD valign="top" style="border-top: 0px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">B.&#95;&#95;&#95;
</DIV></TD>
    <TD style="border-right: 0px solid #000000; border-top: 0px solid #000000">&nbsp;</TD>
    <TD style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">I elect not to receive any of my Deferral Account balance as<BR> of December&nbsp;31,
2008 prior to Separation from Service.</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="6" style="border-top: 1px double #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Special Rules if You Elect a Specified Time Distribution under Paragraph&nbsp;A</U>:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If my Separation from Service or death occurs before the distribution commencement date
elected above, then this election is ignored and my entire Deferral Account balance will be
paid in accordance with the election I made on my Distribution Election Form. My
&#147;Distribution Election Form&#148; means my Initial Election Form or Change in Election Form, as
applicable, on which I have elected the form and timing of distributions that are to be
made after a Separation from Service or death.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If I elected a distribution of less than 100% of my Deferral Account balance as of
December&nbsp;31, 2008, then any remainder will be paid in accordance with my election on the
Distribution Election Form.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Form of Distribution for a Specified Time Distribution Elected in Paragraph&nbsp;A<BR>
for Amounts Deferred on or before December&nbsp;31, 2008</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD><!-- VRule -->
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD><!-- VRule -->
    <TD width="1%">&nbsp;</TD>
    <TD width="66%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
</TR><TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="9" style="border-bottom: 1px double #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>

    <TD nowrap align="left"><B>Benefit</B></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B><BR>Distribution of Benefit</B></TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">Lump sum<BR>
(<I>initial<BR>
below</I>)
</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">Equal annual installments for &#95;&#95;&#95; years (<I>indicate number of <BR>
years here (up to 3&nbsp;years) and initial below</I>)</TD>
    <TD width="1%" style="border-top: 1px solid #000000; border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD valign="top" style="border-top: 0px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000; border-top: 0px solid #000000">&nbsp;</TD>
    <TD style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 0px solid #000000">&nbsp;</TD>
    <TD style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 0px solid #000000; border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&#167; 4.0.1.2&#151;Deferrals Made on or
Before December&nbsp;31, 2008
Benefit
</DIV></TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 1px solid #000000; border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="9" style="border-top: 1px double #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ANY CHANGE TO THE FORM OR TIME OF A SPECIFIED TIME DISTRIBUTION ELECTION IS SUBJECT TO THE
RESTRICTIONS DESCRIBED IN THE AGREEMENT (SEE SECTION 4.4 OF THE AGREEMENT AND THE &#147;CHANGE IN
ELECTION&#148; FORM FOR THE CURRENT RESTRICTIONS.)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I agree to the elections set forth above.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Printed Name:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Signature:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left">Received by the Plan Administrator this _____ day of ____________________, 20___</TD>
</TR>
</table>
</div>

<DIV align="center">
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    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
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<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD colspan="2" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Title:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000; margin-left: 10%">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
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</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
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</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.34
<SEQUENCE>3
<FILENAME>k47547exv10w34.htm
<DESCRIPTION>EX-10.34
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-10.34</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT 10.34</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">SECOND AMENDMENT TO THE<BR>
MERCANTILE BANK OF MICHIGAN<BR>
AMENDED AND RESTATED<BR>
EXECUTIVE DEFERRED COMPENSATION AGREEMENT<BR>
DATED NOVEMBER 18, 2006<BR>
AND AMENDED OCTOBER 23, 2008<BR>
FOR<BR>
&#091;NAME OF EXECUTIVE&#093;

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS SECOND AMENDMENT is adopted this 23rd day of October, 2008, by and between Mercantile
Bank of Michigan, a state-chartered commercial bank located in Grand Rapids, Michigan (the
&#147;Company&#148;), and &#091;Name of Executive&#093; (the &#147;Executive&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company and the Executive executed the Amended and Restated Executive Deferred
Compensation Agreement effective as of November&nbsp;18, 2006, and executed a First Amendment on October
25, 2007 (the &#147;Agreement&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby amend the Agreement for the purpose of providing the Executive with an
election of a specified time distribution. Therefore, the following changes shall be made:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Section&nbsp;1.13 of the Agreement shall be deleted in its entirety and replaced by the following:</I>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">1.13</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<U>Deferral Election Form</U>&#148; means each form established from time to time by the Plan
Administrator that the Executive completes, signs and returns to the Plan Administrator to
designate the amount of Deferrals and, with respect to Deferrals made on and after January&nbsp;1,
2009, to elect the time and form of a Specified Time Distribution.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following Sections&nbsp;1.24a and 1.24b shall be added to the Agreement immediately following
Section
1.24 :</I>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">1.24a</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<U>Specified Time Distribution</U>&#148; means a distribution made at a specified time pursuant
to an Executive&#146;s election on a Specified Time Distribution Election Form or a Deferral
Election Form.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">1.24b</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;<U>Specified Time Distribution Election Form</U>&#148; means the form established from time to
time by the Plan Administrator that the Executive completes, signs and returns to the Plan
Administrator to designate the time and form of a Specified Time Distribution.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following Sections&nbsp;4.0, 4.0.1, 4.0.1.1, 4.0.1.2, 4.0.2, 4.0.2.1 and 4.0.2.2 shall be added
to the Agreement immediately before Section&nbsp;4.1:</I>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">4.0</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Specified Time Distribution</U><I>. </I>If the Executive elects a Specified Time Distribution,
the Company shall distribute to the Executive the benefit described in this Section&nbsp;4.0.
Notwithstanding the prior sentence, if a</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">distribution is payable under Section&nbsp;4.1, 4.2, 4.3,
4.4 or 4.5, then the distribution will be made under Section&nbsp;4.1, 4.2, 4.3, 4.4 or 4.5 and not
under this Section&nbsp;4.0.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">4.0.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Deferrals Made on or Before December&nbsp;31, 2008</U>. For Deferrals made on
or before December&nbsp;31, 2008, the Executive may elect on or before November&nbsp;30, 2008, a
distribution under this Section&nbsp;4.0.1. This election may be made notwithstanding any
restriction to the contrary in Section&nbsp;4.8.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">4.0.1.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Amount of Benefit</U><I>. </I>The benefit under this Section&nbsp;4.0.1 is the
portion of the Deferral Account balance as of December&nbsp;31, 2008 elected by the
Executive on the Specified Time Distribution Election Form.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">4.0.1.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Distribution of Benefit</U>. The Company shall pay the benefit under
this Section&nbsp;4.0.1 to the Executive, commencing on or after March&nbsp;1, 2009, as
elected by the Executive on the Specified Time Distribution Election Form.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">4.0.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Deferrals Made on or After January&nbsp;1, 2009</U>. For Deferrals made on or
after January&nbsp;1, 2009, the Executive may elect a distribution under this Section&nbsp;4.0.2.
This election shall be made for each Plan Year and shall only apply to the Deferrals
made for that Plan Year.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">4.0.2.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Amount of Benefit</U><I>. </I>The benefit under this Section&nbsp;4.0.2 is the
portion or all of the Deferrals for the Plan Year beginning on or after January
1, 2009 for which a Specified Time Distribution election is made, together with
accrued interest, as elected by the Executive on the Deferral Election Forms.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">4.0.2.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Distribution of Benefit</U>. The Company shall pay the benefit under
this Section&nbsp;4.0.2 to the Executive, commencing on or after the earliest date
permitted by Code Section&nbsp;409A, as elected by the Executive on the Deferral
Election Forms.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Section&nbsp;4.8 shall be deleted in its entirety and replaced by the following:</I>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">4.8</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Change in Form or Timing of Distributions</U>. For distribution of benefits under this
Article&nbsp;4, the Executive may elect to delay the timing or change the form of distributions by
submitting the appropriate Election Form(s) or Specified Time Distribution Election Form(s) to
the Plan Administrator. Any such election:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>may not accelerate the time or schedule of any distribution,
except as provided in Code Section&nbsp;409A;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>must, for benefits distributable under Section&nbsp;4.0, be made at
least twelve (12)&nbsp;months prior to the first scheduled distribution;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>must, for benefits distributable under Sections&nbsp;4.0, 4.1, 4.2
and 4.4, delay the commencement of distributions for a minimum of five (5)
years from the date the first distribution was originally scheduled to be made;
<U>and</U></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(h)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>must take effect not less than twelve (12)&nbsp;months after the
amendment is made.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The restrictions in paragraphs (a)&nbsp;through (d)&nbsp;above do not apply to the Executive&#146;s election to
receive a distribution under Section&nbsp;4.0.1.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For purposes of any change under this Section&nbsp;4.8, a distribution paid in the form of installments
shall be deemed to be a single payment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following Sections&nbsp;11.14 and 11.15 shall be added to the Agreement at the end of Article
11:</I>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">11.14</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Deduction Limitation on Benefit Payments</U>. If the Company reasonably anticipates
that the Company&#146;s deduction with respect to any distribution under this Agreement would be
limited or eliminated by application of Code Section&nbsp;162(m), then to the extent deemed
necessary by the Company to ensure that the entire amount of any distribution from this
Agreement is deductible, the Company may delay payment of any amount that would otherwise be
distributed under this Agreement. The delayed amounts shall be distributed to the Executive
(or the Beneficiary in the event of the Executive&#146;s death) at the earliest date the Company
reasonably anticipates that the deduction of the payment of the amount will not be limited or
eliminated by application of Code Section&nbsp;162(m).
</TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">11.15</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Compliance with Section&nbsp;409A</U>. This Agreement shall be interpreted and administered
consistent with Code Section&nbsp;409A.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS OF THE ABOVE</B>, the Company and the Executive hereby agree to this Second Amendment.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">EXECUTIVE:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left">MERCANTILE BANK OF MICHIGAN: &nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>

    <TD colspan="2" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#091;Name of Executive&#093;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">MERCANTILE BANK OF MICHIGAN<BR>
Amended and Restated Executive Deferred Compensation Agreement<BR>
Deferral Election Form &#151; Base Salary

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Specified Time Distribution Election &#151; For Amount Deferred<BR>
On or Before December&nbsp;31, 2008</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>THIS ELECTION MUST BE MADE BY NOVEMBER 30, 2008</B>

</DIV>
<P>
<DIV style="width: 100%; border: 1px solid black; padding: 11px;">



<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Amount of Specified Time Distribution</B>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>&#091;Initial and Complete One&#093;</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">A.<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I elect to receive &#95;&#95;&#95;% of my Deferral Account balance as of December
31, 2008, in the manner described below commencing on
&#95;&#95;&#95; (<I>must be on or after March&nbsp;1, 2009)</I>.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">B.<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I elect not to receive any of my Deferral Account balance as of December&nbsp;31,
2008 prior to Separation from Service (unless I have an Unforeseen Emergency
and apply for a hardship distribution.)</TD>
</TR>

</TABLE>
</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Special Rules if You Elect a Specified Time Distribution under Paragraph&nbsp;A</U>:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If my Separation from Service occurs before the distribution commencement date elected
above, then this election is ignored and my entire Deferral Account balance will be paid in
accordance with the election I made on my Distribution Election Form. My &#147;Distribution
Election Form&#148; means my Initial Election Form or Change in Election Form, as applicable, on
which I have elected the form and timing of distributions that are to be made after my
Separation from Service.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If I elected a distribution of less than 100% of my Deferral Account balance as of
December&nbsp;31, 2008, then any remainder will be paid in accordance with my election on the
Distribution Election Form.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Form of Distribution for a Specified Time Distribution Elected in Paragraph&nbsp;A<BR>
for Amounts Deferred on or before December&nbsp;31, 2008</B>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD><!-- VRule -->
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD><!-- VRule -->
    <TD width="1%">&nbsp;</TD>
    <TD width="66%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
</TR><TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="9" style="border-bottom: 1px double #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>

    <TD nowrap align="left"><B>Benefit</B></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B><BR>Distribution of Benefit</B></TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">Lump sum<BR>
(<I>initial<BR>
below</I>)
</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">Equal annual installments for &#95;&#95;&#95; years (<I>indicate number of <BR>
years here (up to 3&nbsp;years) and initial below</I>)</TD>
    <TD width="1%" style="border-top: 1px solid #000000; border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD width="1%" style="border-left: 1px solid #000000">&nbsp;</TD>
    <TD valign="top" style="border-top: 0px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD style="border-right: 1px solid #000000; border-top: 0px solid #000000">&nbsp;</TD>
    <TD style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 0px solid #000000">&nbsp;</TD>
    <TD style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 0px solid #000000; border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD width="1%" style="border-left: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&#167; 4.0.1.2&#151;Deferrals Made on or
Before December&nbsp;31, 2008
Benefit
</DIV></TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>

    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 1px solid #000000; border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="9" style="border-top: 1px double #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">MERCANTILE BANK OF MICHIGAN<BR>
Amended and Restated Executive Deferred Compensation Agreement<BR>
Deferral Election Form &#151; Base Salary

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ANY CHANGE TO THE FORM OR TIME OF A SPECIFIED TIME DISTRIBUTION ELECTION IS SUBJECT TO THE
RESTRICTIONS DESCRIBED IN THE AGREEMENT (SEE SECTION 4.8 OF THE AGREEMENT AND THE &#147;CHANGE IN
ELECTION&#148; FORM FOR THE CURRENT RESTRICTIONS.)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I agree to the elections set forth above.

</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Printed Name:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Signature:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left">Received by the Plan Administrator this _____ day of ____________________, 20___</TD>
</TR>
</table>
</div>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD colspan="2" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Title:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000; margin-left: 10%">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>






<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">MERCANTILE BANK OF MICHIGAN<BR>
Amended and Restated Executive Deferred Compensation Agreement<BR>
Deferral Election Form &#151; Base Salary<BR>
<DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Base Salary Deferral Election for Plan Year </B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>A.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Base Salary Deferral Election</B></TD>
</TR>

</TABLE>
</DIV>
<P>
<DIV style="width: 100%; border: 1px solid black; padding: 11px;">



<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Amount of Deferral</B>

</DIV>

<DIV align="left" style="margin-top: 6pt"><B>&#091; Initial and complete one &#093;</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD>I elect to defer &#95;&#95;&#95;% of my Base Salary (amount not to exceed &#95;&#95;&#95;%).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></TD>
    <TD width="2%">&nbsp;</TD>
    <TD> I elect to defer $&#95;&#95;&#95;&#95;&#95;&#95; of my Base Salary (amount not to exceed
$&#95;&#95;&#95;&#95;&#95;&#95;).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></TD>
    <TD width="2%">&nbsp;</TD>
    <TD> I elect not to defer any of my Base Salary.</TD>
</TR>

</TABLE>
</DIV>
</DIV>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>B.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Specified Time Distribution of Base Salary Deferral</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Complete this Section&nbsp;B only if you wish to elect a Specified Time Distribution for your Base
Salary Deferral.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I elect to receive on the distribution date indicated below all or a portion of my Base Salary
deferred under this Form for the Plan Year listed above. This distribution date cannot be less
than one (1)&nbsp;full calendar year after the commencement of the Plan Year to which this election
applies. <B>Your distribution will be paid in the form of a lump sum.</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>1) Distribution Amount or 2) Percentage</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>of Plan Year&#146;s</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Base Salary-related Deferrals plus</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Plan Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>interest</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Distribution Date*</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>The distribution date must specify month, day, and year of distribution.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Special Rules</B></U><B>:</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If my Separation from Service occurs before the Distribution Date elected in the table
above, then my election of a Specified Time Distribution in Section&nbsp;B is ignored and my
entire Deferral Account balance will be paid in accordance with the election I made on my
Distribution Election Form. My &#147;Distribution Election Form&#148; means my Initial Election Form
or Change in Election Form, as applicable, on which I have elected the form and timing of
distributions that are to be made after my Separation from Service.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If I elected in the table above a distribution of less than 100% of my Base Salary that
is deferred under Section&nbsp;A for the Plan Year listed above, then any remainder will be paid
in accordance with my election on the Distribution Election Form.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">MERCANTILE BANK OF MICHIGAN<BR>
Amended and Restated Executive Deferred Compensation Agreement<BR>
Deferral Election Form &#151; Base Salary<BR>
<DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ANY CHANGE TO THE TIME OF A SPECIFIED TIME DISTRIBUTION ELECTION AFTER THE BEGINNING OF THE PLAN
YEAR IS SUBJECT TO THE RESTRICTIONS DESCRIBED IN THE AGREEMENT (SEE SECTION 4.8 OF THE AGREEMENT
AND THE &#147;CHANGE IN ELECTION&#148; FORM FOR THE CURRENT RESTRICTIONS.)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ANY CHANGE TO THE FORM OR TIME OF A SPECIFIED TIME DISTRIBUTION ELECTION IS SUBJECT TO THE
RESTRICTIONS DESCRIBED IN THE AGREEMENT (SEE SECTION 4.8 OF THE AGREEMENT AND THE &#147;CHANGE IN
ELECTION&#148; FORM FOR THE CURRENT RESTRICTIONS.)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I agree to the elections set forth above.

</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Printed Name:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Signature:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left">Received by the Plan Administrator this _____ day of ____________________, 20___</TD>
</TR>
</table>
</div>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD colspan="2" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Title:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000; margin-left: 10%">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Bonus Deferral Election for Plan Year </B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>A.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Bonus Deferral Election</B></TD>
</TR>

</TABLE>
</DIV>
<P>
<DIV style="width: 100%; border: 1px solid black; padding: 11px;">



<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Amount of Deferral</B><BR>
<DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD colspan="3" nowrap align="left"><B>&#091;Initial and complete one&#093;</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u> I elect to defer &#95;&#95;&#95;% of my Bonus (amount not to exceed &#95;&#95;&#95;%).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u> I elect to defer $&#95;&#95;&#95;of my Bonus (amount not to exceed
$&#95;&#95;&#95;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u> I elect not to defer any of my Bonus.
</DIV>

</DIV>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>B.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Specified Time Distribution of Bonus Deferral</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Complete this Section&nbsp;B only if you wish to elect a Specified Time Distribution for your Bonus
Deferral.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I elect to receive on the distribution date indicated below all or a portion of my Bonus deferred
under this Form for the Plan Year listed above. This distribution date cannot be less than one (1)
full calendar year from the commencement of the Plan Year to which this election applies. <B>Your
distribution will be paid in the form of a lump sum.</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>1) Distribution Amount or 2) Percentage</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>of Plan Year&#146;s Bonus-related Deferrals</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Plan Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>plus interest</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Distribution Date*</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>The distribution date must specify month, day, and year of distribution.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Special Rules</B></U><B>:</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If my Separation from Service occurs before the Distribution Date elected in the table
above, then my election of a Specified Time Distribution in Section&nbsp;B is ignored and my
entire Deferral Account balance will be paid in accordance with the election I made on my
Distribution Election Form. My &#147;Distribution Election Form&#148; means my Initial Election Form
or Change in Election Form, as applicable, on which I have elected the form and timing of
distributions that are to be made after my Separation from Service.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If I elected in the table above a distribution of less than 100% of my Bonus deferred
under Section&nbsp;A above for the Plan Year listed above, then any remainder will be paid in
accordance with my election on the Distribution Election Form.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ANY CHANGE TO THE TIME OF A SPECIFIED TIME DISTRIBUTION ELECTION
AFTER THE BEGINNING OF THE PLAN YEAR IS SUBJECT TO THE
RESTRICTIONS DESCRIBED IN THE AGREEMENT (SEE SECTION 4.8 OF THE AGREEMENT AND THE &#147;CHANGE IN
ELECTION&#148; FORM FOR THE CURRENT RESTRICTIONS.)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I agree to the elections set forth above.

</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Printed Name:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Signature:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left">Received by the Plan Administrator this _____ day of ____________________, 20___</TD>
</TR>
</table>
</div>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD colspan="2" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Title:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000; margin-left: 10%">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Performance-Based Compensation Deferral Election<BR>
for Plan Year __________</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>A. Performance-Based Compensation Deferral</B>
</DIV>

<P>
<DIV style="width: 100%; border: 1px solid black; padding: 11px;">



<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Amount of Deferral</B><BR>


</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>&#091;Initial and complete one&#093;</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></TD>
    <TD width="2%">&nbsp;</TD>
    <TD> I elect to defer &#95;&#95;&#95;% of my Performance-Based Compensation (amount not
to exceed &#95;&#95;&#95;%).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></TD>
    <TD width="2%">&nbsp;</TD>
    <TD> I elect to defer $&#95;&#95;&#95;&#95;&#95;&#95;&#95; of my Performance-Based Compensation
(amount not to exceed $&#95;&#95;&#95;&#95;&#95;&#95;&#95;).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></TD>
    <TD width="2%">&nbsp;</TD>
    <TD> I elect not to defer any of my Performance-Based Compensation.</TD>
</TR>

</TABLE>
</DIV>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Specified Time Distribution of Performance-Based Compensation Deferral</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Complete this Section&nbsp;B only if you wish to elect a Specified Time Distribution for your
Performance-Based Compensation Deferral</I></B><B>.</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I elect to receive on the distribution date indicated below all or a portion of my
Performance-Based Compensation deferred under this Form for the Plan Year listed above. This
distribution date cannot be less than one (1)&nbsp;full calendar year from the commencement of the Plan
Year to which this election applies. <B>Your distribution will be paid in the form of a lump sum.</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>1) Distribution Amount or 2) Percentage</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>of Plan Year&#146;s Performance-Based</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Plan Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Compensation Deferrals plus interest</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Distribution Date*</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>The distribution date must specify month, day, and year of distribution.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Special Rules</B></U><B>:</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If my Separation from Service occurs before the Distribution Date elected in the table
above, then my election of a Specified Time Distribution under Section&nbsp;B is ignored and my
entire Deferral Account balance will be paid in accordance with the election I made on my
Distribution Election Form. My &#147;Distribution Election Form&#148; means my Initial Election
Form or Change in Election Form, as applicable, on which I have elected the form and
timing of distributions that are to be made after my Separation from Service.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If I elected in the table above a distribution of less than 100% of my
Performance-Based Compensation deferred under Section&nbsp;A for the Plan Year listed above,
then any remainder will be paid in accordance with my election on the Distribution
Election Form.
</TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ANY CHANGE TO THE TIME OF A SPECIFIED TIME DISTRIBUTION ELECTION AFTER JUNE 30 OF THE PLAN YEAR
LISTED ABOVE IS SUBJECT TO THE RESTRICTIONS DESCRIBED IN THE
AGREEMENT (SEE SECTION 4.8 OF THE AGREEMENT AND THE &#147;CHANGE IN ELECTION&#148; FORM FOR THE CURRENT
RESTRICTIONS.)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I agree to the elections set forth above.

</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Printed Name:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Signature:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left">Received by the Plan Administrator this _____ day of ____________________, 20___</TD>
</TR>
</table>
</div>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD colspan="2" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Title:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000; margin-left: 10%">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>



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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.36
<SEQUENCE>4
<FILENAME>k47547exv10w36.htm
<DESCRIPTION>EX-10.36
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-10.36</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT 10.36</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">DIRECTOR FEE SUMMARY

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is a summary of the current director fee arrangements for non-employee
directors serving on the Boards of Directors of Mercantile Bank Corporation (&#147;Mercantile&#148;) and its
wholly owned subsidiary, Mercantile Bank of Michigan (&#147;Bank&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For 2009, non-employee directors of the Bank are paid an annual retainer of $5,000, and a fee
of $350 for each meeting of the Board of Directors of the Bank that they attend. In addition,
non-employee directors are paid a meeting fee of $350 for each meeting of the Audit Committee, $300
for each meeting of the Compensation Committee and the Governance and Nominating Committee, and
$200 for each meeting of other committees of the Board of Directors of the Bank that they attend.
Non-employee directors are also paid fees of the same amount for meetings of Mercantile&#146;s Board of
Directors and its committees, when for Board meetings there is not also a meeting of the Board of
Directors of the Bank on the same day, and for committee meetings when there is not also a meeting
of a committee of the Board of Directors of the Bank having the same name or function on the same
day. For meetings that are held by telephone or other remote communications equipment, the meeting
fees are half the amount described above. One annual retainer fee is also paid to each director who
serves as Chairman of the Audit Committees, the Compensation Committees and the Governance and
Nominating Committees of Mercantile&#146;s and the Bank&#146;s Boards of Directors. The annual retainer is,
for the Chairman of the Audit Committees &#151; $3,000, for the Chairman of the Compensation Committees
&#151; $2,000, and for the Chairman of the Governance and Nominating Committees &#151; $2,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The same persons currently serve on the Boards of Directors of Mercantile and the Bank. Under
the Bank&#146;s deferred compensation plan for non-employee directors, directors may elect to defer the
receipt of the annual retainer and meeting fees until they are no longer serving on the Board or
until specific dates that they select. Directors are eligible to receive stock-based awards under
the Stock Incentive Plan of 2006.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.39
<SEQUENCE>5
<FILENAME>k47547exv10w39.htm
<DESCRIPTION>EX-10.39
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-10.39</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT 10.39</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">AMENDED AND RESTATED<BR>
MERCANTILE BANK CORPORATION<BR>
STOCK INCENTIVE PLAN OF 2006<BR>
DATED NOVEMBER 18, 2008

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>SECTION 1</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Establishment Of Plan; Purpose Of Plan</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.1 Establishment of Plan. </B>The Company hereby establishes the STOCK INCENTIVE PLAN OF 2006
for its Directors and certain of its Employees. The Plan permits the grant and award of Stock
Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Stock Awards and
other stock-based awards and stock-related awards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.2 Purpose of Plan. </B>The purpose of the Plan is to provide Directors and Employees with an
increased incentive to contribute to the long-term performance and growth of the Company and its
Subsidiaries, to join the interests of Directors and Employees with the interests of the Company&#146;s
shareholders through the opportunity for increased stock ownership and to attract and retain
Participants. The Plan is further intended to provide flexibility to the Company in structuring
long-term incentive compensation to best promote the foregoing objectives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.3 Approval of Plan and Incentive Awards. </B>The Plan will be effective upon approval by the
Company&#146;s shareholders. The Plan contemplates that Directors may be Participants and that the
Directors, as members of either the Board or of a committee of the Board, may approve grants of
Incentive Awards to Directors. Approval of the Plan by the Company&#146;s shareholders shall constitute
authorization and approval of such grants.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 2</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Definitions</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following words have the following meanings unless a different meaning plainly is required
by the context:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.1 </B>&#147;<B>Act</B>&#148; means the Securities Exchange Act of 1934, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.2 </B>&#147;<B>Affiliate</B>&#148; means any organization controlling, controlled by or under common control with
the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.3 </B>&#147;<B>Board</B>&#148; means the Board of Directors of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.4 </B>&#147;<B>Cause</B>&#148; means, with respect to termination of employment, (1)&nbsp;willful continued failure to
perform or willful poor performance of duties (other than due to Disability) after warning and
reasonable opportunity to meet reasonable required performance standards; (2)&nbsp;gross negligence
causing or putting the Company or any Affiliate at risk of significant damage or harm; (3)
misappropriation of or intentional damage to the property of the Company or any Affiliate; (4)
conviction of a felony (other than negligent vehicular homicide); (5)&nbsp;intentional act or omission
that the Participant knows or should know is significantly detrimental to the interests of the
Company or any Affiliate; (6)&nbsp;removal of an Employee by order of or at the direction of a
regulatory agency having jurisdiction over the Company or any of its Subsidiaries; or (7)&nbsp;material
violation of any employment agreement between the Company (or any Affiliate) and the Participant.
The existence of Cause for termination of employment shall in each case be determined by the
Committee in its sole discretion and consistent with the definition set forth in this <I>Section&nbsp;2.4.</I>
The Committee may make such determination before or after the termination of employment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A Director will be removed for &#147;Cause&#148; for purposes of this Plan if and only if he or she has
been removed for cause in compliance with the Company&#146;s Articles of Incorporation and applicable
law.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.5 </B>&#147;<B>Change in Control</B>,&#148; unless otherwise defined in an Incentive Award agreement, means (a)
the failure of the Continuing Directors at any time to constitute at least a majority of the
members of the Board; (b)&nbsp;the acquisition by any Person other than an Excluded Holder of beneficial
ownership (within the meaning of Rule&nbsp;13d-3 issued under the Act) of 40% or more of the outstanding
Common Stock or the combined voting power of the Company&#146;s outstanding securities entitled to vote
generally in the election of directors; (c)&nbsp;a reorganization, merger or consolidation other than
such a transaction (i)&nbsp;that is done for the purpose of reincorporation or (ii)&nbsp;after which the
Company&#146;s shareholders immediately prior to the transaction continue to beneficially own more than
50% of the total fair market value and total voting power of the outstanding capital stock of the
entity surviving the transaction; (d)&nbsp;a complete liquidation or dissolution of the Company or the
sale or disposition of all or substantially all of the assets of the Company; (e)&nbsp;the occurrence of
a nature that would be required to be reported in response to Item 6(e) of Schedule&nbsp;14A of
Regulation&nbsp;14A issued under the Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.6 </B>&#147;<B>Code</B>&#148; means the Internal Revenue Code of 1986, as amended. Each reference herein to a
section or sections of the Code shall, unless otherwise noted, be deemed to include a reference to
the rules and regulations issued under such section or sections of the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.7 </B>&#147;<B>Committee</B>&#148; means the Compensation Committee of the Board or such other committee as the
Board may designate from time to time. The Committee shall consist of at least two Directors and
all of its members shall be &#147;non-employee directors&#148; as defined in Rule&nbsp;16b-3 issued under the Act
and &#147;outside directors&#148; as defined in Section 162(m) of the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.8 </B>&#147;<B>Common Stock</B>&#148; means the Company&#146;s common stock, no par value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.9 </B>&#147;<B>Company</B>&#148; means Mercantile Bank Corporation, a Michigan corporation, and its successors
and assigns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.10 &#147;Continuing Directors&#148; </B>means the individuals constituting the Board as of the date this
Plan was adopted and any subsequent directors whose election or nomination for election by the
Company&#146;s shareholders was approved by a vote of a majority of the individuals who are then
Continuing Directors, but specifically excluding any individual whose initial assumption of office
occurs as a result of either an actual or threatened solicitation subject to Rule&nbsp;14a-12(c) of
Regulation&nbsp;14A issued under the Act or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.11 </B>&#147;<B>Covered Employee</B>&#148; means any Employee who is or may become a &#147;Covered Employee,&#148; as
defined in Section 162(m) of the Code, and who is designated, either as an individual Employee or
class of Employees, by the Committee within the shorter of (i)&nbsp;90&nbsp;days after the beginning of the
Performance Period, or (ii)&nbsp;the period of time after the beginning of the Performance Period and
before 25% of the Performance Period has elapsed, as a &#147;Covered Employee&#148; under this Plan for such
applicable Performance Period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.12 </B>&#147;<B>Director</B>&#148; means a member of the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.13 </B>&#147;<B>Disability</B>&#148; means a permanent disability as determined by the Committee in its
discretion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.14 </B>&#147;<B>Employee</B>&#148; means an employee of the Company or one of its Subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.15 </B>&#147;<B>Employee Benefit Plan</B>&#148; means any plan or program established by the Company or a
Subsidiary for the compensation or benefit of Employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.16 </B>&#147;<B>Excluded Holder</B>&#148; means the Company, a Subsidiary or any Employee Benefit Plan of the
Company or a Subsidiary or any trust holding Common Stock or other securities pursuant to the terms
of an Employee Benefit Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.17 </B>&#147;<B>Incentive Award</B>&#148; means the award or grant of a Stock Option, a Stock Appreciation Right,
Restricted Stock, a Restricted Stock Unit, a Stock Award, or another stock-based or stock-related
award, to a Participant pursuant to the Plan.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.18 </B>&#147;<B>Market Value</B>&#148; shall equal the closing price of Common Stock reported on Nasdaq on
the date of grant, exercise or vesting, as applicable, or if Nasdaq is closed on that date,
the last preceding date on which Nasdaq was open for trading and on which shares of Common Stock
were traded. If the Common Stock is not listed on Nasdaq, the Market Value shall be determined by
any means deemed fair and reasonable by the Committee in a manner consistent with the valuation
principles of Section&nbsp;409A of the Code except when the Committee expressly determines not to use
Section&nbsp;409A valuation principles, which determination shall be final and binding on all parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.19 </B>&#147;<B>Mature Shares</B>&#148; means shares of Common Stock that a Participant has owned for at least
six months and that meet any other holding requirements established by the Committee for the shares
to be used for attestation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.20 </B>&#147;<B>Nasdaq</B>&#148; means the NASDAQ National Market, or if the Common Stock is not listed for
trading on the NASDAQ National Market on the date in question, then such other United States-based
quotation system or stock exchange on which the Common Stock may be traded on the date in question.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.21 </B>&#147;<B>Participant</B>&#148; means a Director or Employee who is granted an Incentive Award under the
Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.22 </B>&#147;<B>Performance</B>&#148; means the level of achievement of the performance goals established by the
Committee pursuant to <I>Section&nbsp;10.1</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.23 </B>&#147;<B>Performance Measures</B>&#148; means measures as described in <I>Section&nbsp;10 </I>on which the performance
goals are based.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.24 </B>&#147;<B>Performance Period</B>&#148; means the period of time during which the performance goals must be
met to determine the degree of payout, the vesting, or both, with respect to an Incentive Award
that is intended to qualify as Performance-Based Compensation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.25 </B>&#147;<B>Performance-Based Compensation</B>&#148; means compensation under an Incentive Award that
satisfies the requirements of Section 162(m) of the Code for certain &#147;performance-based
compensation&#148; paid to Covered Employees. Notwithstanding the foregoing, nothing in this Plan shall
be construed to mean that an Incentive Award which does not satisfy the requirements for
performance-based compensation under Section 162(m) of the Code does not constitute
performance-based compensation for other purposes, including Section&nbsp;409A of the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.26 </B>&#147;<B>Person</B>&#148; has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.27 </B>&#147;<B>Plan</B>&#148; means the Mercantile Bank Corporation Stock Incentive Plan of 2006 as set forth
herein, as it may be amended from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.28 </B>&#147;<B>Restricted Period</B>&#148; means the period of time during which Restricted Stock, Restricted
Stock Units or other stock-based or stock-related awards that are awarded under the Plan are
subject to the risk of forfeiture, restrictions on transfer and other restrictions or conditions
pursuant to <I>Sections&nbsp;7 </I>or <I>8</I>. The Restricted Period may differ among Participants and may have
different expiration dates with respect to shares of Common Stock covered by the same Incentive
Award.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.29 </B>&#147;<B>Restricted Stock</B>&#148; means Common Stock awarded to a Participant pursuant to <I>Section&nbsp;7 </I>of
the Plan while such Common Stock remains subject to the risk of forfeiture, restrictions on
transfer and other restrictions or conditions pursuant to <I>Section&nbsp;7</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.30 </B>&#147;<B>Restricted Stock Unit</B>&#148; means an award to a Participant pursuant to <I>Section&nbsp;7 </I>of the Plan
and described as a &#147;Restricted Stock Unit&#148; in <I>Section&nbsp;7</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.31 </B>&#147;<B>Retirement</B>&#148; means the voluntary termination of employment by a Participant after he or
she has attained the age of 65 or such other age as may be determined by the Committee in its sole
discretion or as otherwise may be set forth in the Incentive Award agreement or other grant
document with respect to a Participant and a particular Incentive Award.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.32 </B>&#147;<B>Stock Appreciation Right</B>&#148; or &#147;<B>SAR</B>&#148; means a right awarded to a Participant pursuant to
<I>Section&nbsp;6 </I>of the Plan, which shall entitle the Participant to receive cash, Common Stock, other
property or a combination thereof, as determined by the Committee, in an amount equal to or
otherwise based on the
excess of (a)&nbsp;the Market Value of a share of Common Stock at the time of exercise over (b)&nbsp;the
exercise price of the right, as established by the Committee on the date the award is granted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.33 </B>&#147;<B>Stock Award</B>&#148; means an award of Common Stock awarded to a Participant pursuant to <I>Section
8 </I>of the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.34 </B>&#147;<B>Stock Option</B>&#148; means the right to purchase Common Stock at a stated price for a specified
period of time. For purposes of the Plan, a Stock Option may be either an incentive stock option
within the meaning of Section 422(b) of the Code or a nonqualified stock option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.35 </B>&#147;<B>Subsidiary</B>&#148; means any corporation or other entity of which 50% or more of the
outstanding voting stock or voting ownership interest is directly or indirectly owned or controlled
by the Company or by one or more Subsidiaries of the Company. The term &#147;Subsidiary&#148; includes
present and future Subsidiaries of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.36 </B>&#147;<B>Termination</B>&#148; or &#147;<B>Cessation</B>&#148; of employment shall be considered to occur on the date on
which the Employee is no longer obligated to perform services for the Company or any of its
Subsidiaries and the Employee&#146;s right to re-employment is not guaranteed by statute, contract or
written policy of the Company, regardless of whether the Employee continues to receive compensation
from the Company or any of its Subsidiaries after such date. The following shall not be considered
such a termination or cessation: (i)&nbsp;a transfer of an employee among the Company and its
Subsidiaries; (ii)&nbsp;a leave of absence, duly authorized in writing by the Company, for military
service or for any other purpose approved by the Company if the period of such leave does not
exceed 90&nbsp;days; (iii)&nbsp;a leave of absence in excess of 90&nbsp;days, duly authorized in writing by the
Company, provided that the employee&#146;s right to re-employment is guaranteed by statute, contract or
written policy of the Company; or (iv)&nbsp;a termination of employment as an officer with continued
service as an Employee or Director.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 3</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Administration</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.1 Power and Authority. </B>The Committee shall administer the Plan, and subject to the express
provisions of the Plan, the Committee shall be authorized and empowered to do all things that it
determines to be necessary or appropriate in connection with the administration of this Plan. Any
power or authority of the Committee may also be exercised by the Board, except to the extent that
the grant or exercise of such power or authority would cause any Incentive Award or transaction to
become subject to (or lose an exemption under) the short-swing profit recovery provisions of
Section&nbsp;16 of the Act or cause an Incentive Award intended to qualify for treatment as
performance-based compensation under Section 162(m) of the Code not to qualify for such treatment.
To the extent that any permitted action taken by the Board conflicts with action taken by the
Committee, the Board action shall control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Committee may delegate any, some or all of its record keeping, calculation, payment and
other ministerial or administrative authority and responsibility from time to time to and among one
or more individuals, who are members of the Committee or Employees of the Company or its
Subsidiaries or Affiliates, but all actions taken pursuant to delegated authority and
responsibility shall be subject to such review, change and approval by the Committee as the
Committee considers appropriate. Except as limited in the Plan, the Committee shall have all of
the express and implied powers and duties set forth in the Bylaws of the Company and the Plan,
shall have full power and authority to interpret the provisions of the Plan and Incentive Awards
granted under the Plan and shall have full power and authority to supervise the administration of
the Plan and Incentive Awards granted under the Plan and to make all other determinations and do
all things considered necessary or advisable for the administration of the Plan. All
determinations, interpretations and selections made by the Committee regarding the Plan shall be
final and conclusive. The Committee shall hold its meetings at such times and places as it
considers advisable. Action may be taken by a written instrument signed by all of the members of
the Committee and any action so taken shall be fully as effective as if it had been taken at a
meeting duly called and held. The Committee shall prescribe, amend and rescind rules and
regulations for the conduct of its business and shall define
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">terms not otherwise defined herein, in
each case as it considers advisable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.2 Grants or Awards to Participants. </B>In accordance with and subject to the provisions of the
Plan, the Committee shall have the authority to determine all provisions of Incentive Awards
including,
without limitation: (a)&nbsp;the persons who shall be selected as Participants; (b)&nbsp;the nature and,
subject to the limitations set forth in <I>Sections&nbsp;4.1 </I>and <I>4.2 </I>of the Plan, extent of the Incentive
Awards to be made to each Participant (including the number of shares of Common Stock to be subject
to each Incentive Award, any exercise or purchase price, the manner in which an Incentive Award
will vest or become exercisable and the form of payment for the Incentive Award); (c)&nbsp;the time or
times when Incentive Awards will be granted; (d)&nbsp;the duration of each Incentive Award; and (e)&nbsp;the
restrictions and other conditions to which payment or vesting of Incentive Awards may be subject.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.3 Amendments or Modifications of Incentive Awards. </B>Subject to <I>Section&nbsp;12</I>, the Committee
shall have the authority to amend or modify the terms of any outstanding Incentive Award in any
manner, provided that the amended or modified terms are not prohibited by the Plan as then in
effect and provided that such actions do not cause an Incentive Award not otherwise subject to
Section&nbsp;409A of the Code to become subject to Section&nbsp;409A of the Code. The Committee shall
without limitation, have the authority to: (a)&nbsp;modify the number of shares or other terms and
conditions of an Incentive Award; provided that any increase in the number of shares of an
Incentive Award other than pursuant to <I>Section&nbsp;4.3 </I>will be considered to be a new grant with
respect to such additional shares for purposes of Section&nbsp;409A of the Code and such new grant shall
be made at Market Value on the date of the new grant; (b)&nbsp;extend the term of an Incentive Award to
a date that is no later than the earlier of the latest date upon which the Incentive Award could
have expired by its terms under any circumstances or the 10th anniversary of the date of grant (for
purposes of clarity, as permitted under Section&nbsp;409A of the Code, if the term of a Stock Option is
extended at a time when the Stock Option exercise price equals or exceeds the Market Value, it will
not be an extension of the term of the Stock Option, but instead will be treated as a modification
of the Stock Option and a new Stock Option will be treated as having been granted); (c)&nbsp;accelerate
the exercisability or vesting or otherwise terminate, waive or modify any restrictions relating to
an Incentive Award; (d)&nbsp;accept the surrender of any outstanding Incentive Award; and (e)&nbsp;to the
extent not previously exercised or vested, authorize the grant of new Incentive Awards in
substitution for surrendered Incentive Awards (such grant of new Incentive Awards will be
considered to be a new grant for purposes of Section&nbsp;409A of the Code and such new grant shall be
made at Market Value on the date of the new grant); <I>provided, </I>that Incentive Awards issued under
the Plan may not be repriced, replaced, regranted through cancellation or modified without
shareholder approval if the effect of such repricing, replacement, regrant or modification would be
to reduce the exercise price or base price of such Incentive Awards to the same Participants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.4 Indemnification of Committee Members. </B>No member or former member of the Committee, or any
individual or group to whom authority or responsibility is or has been delegated, shall be
personally responsible or liable for any act or omission in connection with the performance of
powers or duties or the exercise of discretion or judgment in the administration and implementation
of the Plan. Each person who is or was a member of the Committee, and any other individual or
group exercising delegated authority or responsibility with respect to the Plan, shall be
indemnified and held harmless by the Company from and against any cost, liability or expense
imposed or incurred in connection with such person&#146;s or the Committee&#146;s taking or failing to take
any action under the Plan or the exercise of discretion or judgment in the administration and
implementation of the Plan. This <I>Section&nbsp;3.4 </I>shall not be construed as limiting the Company&#146;s or
any Subsidiary&#146;s ability to terminate or otherwise alter the terms and conditions of the employment
of an individual or group exercising delegated authority or responsibility with respect to the
Plan, or to discipline any such person. Each such person shall be justified in relying on
information furnished in connection with the Plan&#146;s administration by any appropriate person or
persons.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 4</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Shares Subject to the Plan</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.1 Number of Shares. </B>Subject to adjustment as provided in <I>Section&nbsp;4.3 </I>of the Plan, the
total number of shares available for Incentive Awards under the Plan shall be 350,000 shares of
Common Stock, plus all shares subject to Incentive Awards that are canceled, surrendered, modified,
exchanged for substitute Incentive Awards or that expire or terminate prior to the exercise or
vesting of the Incentive
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Awards in full, plus shares that are surrendered to the Company in
connection with the exercise or vesting of Incentive Awards, whether previously owned or otherwise
subject to such Incentive Awards, and plus any authorized shares that are or become available under
the Company&#146;s Independent Director Stock Option Plan, 2004 Employee Stock Option Plan or the 2000
Employee Stock Option Plan and not then subject to outstanding stock options, stock awards, or
restricted stock awards under any such plan. Such
shares shall be authorized and may be unissued shares, shares issued and repurchased by the
Company (including shares purchased on the open market), shares issued and otherwise reacquired by
the Company and shares otherwise held by the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.2 Limitation Upon Incentive Awards. </B>No Participant shall be granted, during any calendar
year, Incentive Awards with respect to more than 25% of the total number of shares of Common Stock
available for Incentive Awards under the Plan set forth in <I>Section&nbsp;4.1 </I>of the Plan, subject to
adjustment as provided in <I>Section&nbsp;4.3 </I>of the Plan, but only to the extent that such adjustment will
not affect the status of any Incentive Award previously issued or that may thereafter be issued as
Performance-Based Compensation. The purpose of this <I>Section&nbsp;4.2 </I>is to ensure that the Plan
provides Performance-Based Compensation, and this <I>Section&nbsp;4.2 </I>shall be interpreted, administered
and amended if necessary to achieve that purpose.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.3 Adjustments.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(a)&nbsp;Stock Dividends and Distributions. </B>If the number of shares of Common Stock
outstanding changes by reason of a stock dividend, stock split, recapitalization or other
general distribution of Common Stock or other securities to holders of Common Stock, the
number and kind of securities subject to outstanding Incentive Awards and available for
issuance under the Plan, and the limitation provided in <I>Section&nbsp;4.2</I>, together with
applicable exercise prices and base prices, shall be adjusted in such manner and at such
time as shall be equitable under the circumstances. No fractional shares shall be issued
pursuant to the Plan and any fractional shares resulting from such adjustments shall be
eliminated from the respective Incentive Awards.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b)&nbsp;Other Actions Affecting Common Stock. </B>If there occurs, other than as described in
<I>Section&nbsp;4.3(a)</I>, any merger, business combination, recapitalization, reclassification,
subdivision or combination approved by the Board that would result in the persons who were
shareholders of the Company immediately prior to the effective time of any such transaction
owning or holding, in lieu of or in addition to shares of Common Stock, other securities,
money and/or property (or the right to receive other securities, money and/or property)
immediately after the effective time of such transaction, then the outstanding Incentive
Awards (including exercise prices and base prices) and reserves for Incentive Awards under
the Plan shall be adjusted in such manner and at such time as shall be equitable under the
circumstances. It is intended that in the event of any such transaction, Incentive Awards
under the Plan shall entitle the holder of each Incentive Award to receive (upon exercise
in the case of Stock Options and SARs), in lieu of or in addition to shares of Common
Stock, any other securities, money and/or property receivable upon consummation of any such
transaction by holders of Common Stock with respect to each share of Common Stock
outstanding immediately prior to the effective time of such transaction; upon any such
adjustment, holders of Incentive Awards under the Plan shall have only the right to receive
in lieu of or in addition to shares of Common Stock such other securities, money and/or
other property as provided by the adjustment.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 5</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Stock Options</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.1 Grant. </B>A Participant may be granted one or more Stock Options under the Plan. No
Participant shall have any rights as a shareholder with respect to any shares of stock subject to
Stock Options granted hereunder until said shares have been issued. For purposes of determining
the number of shares available under the Plan, each Stock Option shall count as the number of
shares of Common Stock subject to the Stock Option. Stock Options shall be subject to such terms
and conditions, consistent with the other provisions of the Plan, as may be determined by the
Committee in its sole discretion. The Committee, in its sole discretion, may establish vesting
schedules (i)&nbsp;based upon Company performance, or (ii)&nbsp;that extend over a period of time selected by
the Committee. In addition, the Committee may vary,
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">among Participants and among Stock Options
granted to the same Participant, any and all of the terms and conditions of the Stock Options
granted under the Plan. Subject to the limitation imposed by <I>Section&nbsp;4.2 </I>of the Plan, the
Committee shall have complete discretion in determining the number of Stock Options granted to each
Participant. The Committee may designate whether or not a Stock Option is to be considered an
incentive stock option as defined in Section 422(b) of the Code; <I>provided</I>, that the number of
shares of Common Stock that may be designated as subject to incentive stock options for any given
Participant shall be limited to that number of shares that become exercisable for the first
time by the Participant during any calendar year (under all plans of the Company and its
Subsidiaries) and have an aggregate Market Value less than or equal to $100,000 (or such other
amount as may be set forth in relevant sections of the Code) and all shares subject to an Incentive
Award that have a Market Value in excess of such aggregate amount shall automatically be subject to
Stock Options that are not incentive stock options. No Stock Option granted to a Director who is
not an Employee shall be considered an incentive stock option under Section 422(b) of the Code.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.2 Stock Option Agreements. </B>Stock Options shall be evidenced by stock option agreements,
certificates of award, or both, containing the terms and conditions applicable to such Stock
Options. To the extent not covered by a stock option agreement or certificate of award, the terms
and conditions of this <I>Section&nbsp;5 </I>shall govern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.3 Stock Option Exercise Price. </B>The per share Stock Option exercise price shall be
determined by the Committee, but shall be a price that is equal to or greater than 100% of the
Market Value (or such higher amount as may be necessary under <I>Section&nbsp;5.5 </I>below). The date of
grant of a Stock Option shall be the date the Stock Option is authorized by the Committee or a
future date specified by the Committee as the date for issuing the Stock Option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.4 Medium and Time of Payment. </B>The exercise price for each share purchased pursuant to a
Stock Option granted under the Plan shall be payable in cash or, if the Committee consents or
provides in the applicable stock option agreement or grant, in Mature Shares or other consideration
substantially equivalent to cash. The time and terms of payment may be amended with the consent of
a Participant before or after exercise of a Stock Option, provided that such amendment would not
cause a Stock Option to become subject to Section&nbsp;409A of the Code. The Committee may implement a
program for the broker-assisted cashless exercise of Stock Options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.5 Stock Options Granted to 10% Shareholders. </B>No Stock Option granted to any Participant who
at the time of such grant owns, together with stock attributed to such Participant under Section
424(d) of the Code, more than 10% of the total combined voting power of all classes of stock of the
Company or any of its Subsidiaries may be designated as an incentive stock option, unless such
Stock Option provides an exercise price equal to at least 110% of the Market Value and the exercise
of the Stock Option after the expiration of five years from the date of grant of the Stock Option
is prohibited by its terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.6 Limits on Exercisability. </B>Except as set forth in <I>Section&nbsp;5.5</I>, Stock Options shall be
exercisable for such periods, not to exceed 10&nbsp;years from the date of grant, as may be fixed by the
Committee. At the time of exercise of a Stock Option, the holder of the Stock Option, if requested
by the Committee, must represent to the Company that the shares are being acquired for investment
and not with a view to the distribution thereof. The Committee may in its discretion require a
Participant to continue the Participant&#146;s service with the Company or its Subsidiaries for a
certain length of time prior to a Stock Option becoming exercisable and may eliminate such delayed
vesting provisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.7 Restrictions on Transferability.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(a)&nbsp;General. </B>Unless the Committee otherwise consents or permits (before or after the
stock option grant) or unless the stock option agreement or grant provides otherwise, Stock
Options granted under the Plan may not be sold, exchanged, transferred, pledged, assigned
or otherwise alienated or hypothecated except by will or the laws of descent and
distribution, and, as a condition to any transfer permitted by the Committee or the terms
of the stock option agreement or grant, the transferee must execute a written agreement
permitting the Company to withhold from the shares subject to the Stock Option a number of
shares having a Market Value at least equal to the amount of any federal, state or local
withholding or other taxes associated with or resulting from the exercise of a Stock
Option. All provisions of a Stock Option that are determined
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">with reference to the
Participant, including without limitation those that refer to the Participant&#146;s employment
with the Company or its Subsidiaries, shall continue to be determined with reference to the
Participant after any transfer of a Stock Option.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b)&nbsp;Other Restrictions. </B>The Committee may impose other restrictions on any shares of
Common Stock acquired pursuant to the exercise of a Stock Option under the Plan as the
Committee deems advisable, including, without limitation, holding periods or further
transfer
restrictions, forfeiture or &#147;claw-back&#148; provisions, and restrictions under applicable
federal or state securities laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.8 Termination of Employment or Directorship Status. </B>Unless the Committee otherwise consents
or permits (before or after the stock option grant) or unless the stock option agreement or grant
provides otherwise:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(a)&nbsp;General. </B>If a Participant ceases to be a Director or an Employee for any reason
other than the Participant&#146;s death, Disability, Retirement (in the case of Employees only)
or termination for Cause, the Participant may exercise his or her Stock Options in
accordance with their terms for a period of three months after such termination of
employment or directorship status, but only to the extent the Participant was entitled to
exercise the Stock Options on the date of termination.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b)&nbsp;Death. </B>If a Participant dies either while an Employee or Director or after the
termination of employment or directorship other than for Cause but during the time when the
Participant could have exercised a Stock Option, the Stock Option issued to such
Participant shall be exercisable in accordance with its terms by the personal
representative of such Participant or other successor to the interest of the Participant
for one year after the Participant&#146;s death, but only to the extent that the Participant was
entitled to exercise the Stock Option on the date of death or termination of employment or
directorship, whichever first occurred, and not beyond the original terms of the Stock
Option.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(c)&nbsp;Disability. </B>If a Participant ceases to be an Employee or Director of the Company
or one of its Subsidiaries due to the Participant&#146;s Disability, the Participant may
exercise his or her Stock Options in accordance with their terms for one year following
such termination of employment or directorship, but only to the extent that the Participant
was entitled to exercise the Stock Options on the date of such event and not beyond the
original terms of the Stock Options.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(d)&nbsp;Participant Retirement. </B>If a Participant Retires as an Employee, Stock Options
granted under the Plan to that Participant may be exercised in accordance with their terms
during the remaining terms of the Stock Options.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(e)&nbsp;Termination for Cause. </B>If a Participant&#146;s employment is terminated for Cause or
the Participant is removed as a Director for Cause, the Participant shall have no further
right to exercise any Stock Options previously granted and all of the Participant&#146;s
outstanding Stock Options shall automatically be forfeited and returned to the Company.
The Committee or officers designated by the Committee shall have absolute discretion to
determine whether a termination or removal is for Cause.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 6</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Stock Appreciation Rights</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.1 Grant. </B>A Participant may be granted one or more Stock Appreciation Rights under the Plan
and such SARs shall be subject to such terms and conditions, consistent with the other provisions
of the Plan, as shall be determined by the Committee in its sole discretion. A SAR may relate to a
particular Stock Option and may be granted simultaneously with or subsequent to the Stock Option to
which it relates. Except to the extent otherwise modified in the grant, (i)&nbsp;SARs not related to a
Stock Option shall be granted subject to the same terms and conditions applicable to Stock Options
as set forth in <I>Section&nbsp;5</I>, and (ii)&nbsp;all SARs related to Stock Options granted under the Plan shall
be granted subject to the same restrictions and conditions and shall have the same vesting,
exercisability, forfeiture and termination
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">provisions as the Stock Options to which they relate.
SARs may be subject to additional restrictions and conditions. The per-share base price for
exercise or settlement of SARs shall be determined by the Committee, but shall be a price that is
equal to or greater than the Market Value of such shares. Other than as adjusted pursuant to
Section&nbsp;4.3, the base price of SARs may not be reduced without shareholder approval (including
canceling previously awarded SARs and regranting them with a lower base price).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.2 Exercise; Payment. </B>To the extent a SAR relates to a Stock Option, the SAR may be
exercised only when the related Stock Option could be exercised and only when the Market Value of
the
shares subject to the Stock Option exceed the exercise price of the Stock Option. When a
Participant exercises such SARs, the Stock Options related to such SARs shall automatically be
cancelled with respect to an equal number of underlying shares. Unless the Committee decides
otherwise (in its sole discretion), SARs shall only be paid in cash or in shares of Common Stock.
For purposes of determining the number of shares available under the Plan, each Stock Appreciation
Right shall count as one share of Common Stock, without regard to the number of shares, if any,
that are issued upon the exercise of the Stock Appreciation Right and upon such payment.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 7</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Restricted Stock and Restricted Stock Units</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.1 Grant. </B>Subject to the limitations set forth in <I>Sections&nbsp;4.1 </I>and <I>4.2 </I>of the Plan,
Restricted Stock and Restricted Stock Units may be granted to Participants under the Plan. Shares
of Restricted Stock are shares of Common Stock the retention, vesting and/or transferability of
which is subject, during specified periods of time, to such conditions (including continued
employment and/or achievement of one or more performance goals established by the Committee
pursuant to <I>Section&nbsp;10</I>) and terms as the Committee deems appropriate, but in no case shall the
Committee provide for any deferral of compensation after such conditions and terms are satisfied.
Restricted Stock Units are Incentive Awards denominated in units of Common Stock under which the
issuance of shares of Common Stock is subject to such conditions (including continued employment
and/or achievement of one or more performance goals established by the Committee pursuant to
<I>Section&nbsp;10</I>) and terms as the Committee deems appropriate. For purposes of determining the number
of shares available under the Plan, each Restricted Stock Unit shall count as the number of shares
of Common Stock subject to the Restricted Stock Unit. Unless determined otherwise by the
Committee, each Restricted Stock Unit shall be equal to one share of Common Stock and shall entitle
a Participant to either shares of Common Stock or an amount of cash determined with reference to
the value of shares of Common Stock. To the extent determined by the Committee, Restricted Stock
and Restricted Stock Units may be satisfied or settled in cash, in shares of Common Stock or in a
combination thereof. Restricted Stock Units shall be settled no later than the 15th day of the
third month after the Restricted Stock Units vest. Restricted Stock and Restricted Stock Units
granted pursuant to the Plan need not be identical but shall be consistent with the terms of the
Plan. Subject to the requirements of applicable law, the Committee shall determine the price, if
any, at which awards of Restricted Stock or Restricted Stock Units, or shares of Common Stock
issuable pursuant to Restricted Stock Unit awards, shall be sold or awarded to a Participant, which
may vary from time to time and among Participants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.2 Restricted Stock Agreements. </B>Awards of Restricted Stock and Restricted Stock Units shall
be evidenced by restricted stock or restricted stock unit agreements or certificates of award
containing such terms and conditions, consistent with the provisions of the Plan, as the Committee
shall from time to time determine. Shares of Restricted Stock not evidenced by a certificate shall
be recorded in &#147;book entry&#148; form in the Company&#146;s stock records. Unless the restricted stock or
restricted stock unit agreement or certificate of award provides otherwise, awards of Restricted
Stock and Restricted Stock Units shall be subject to the terms and conditions set forth in this
<I>Section&nbsp;7</I>.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.3 Vesting. </B>The grant, issuance, retention and vesting of shares of Restricted Stock and
Restricted Stock Units and the settlement of Restricted Stock Units shall occur at such time and in
such installments as determined by the Committee or under criteria established by the Committee.
The Committee shall have the right to make the timing of the grant and/or issuance of, the ability
to retain and the vesting and/or the settlement of Restricted Stock Units and shares of Restricted
Stock subject to continued employment, passage of time and/or Performance Measures as deemed
appropriate by the Committee. In no event shall the grant, issuance, retention, vesting or
settlement of shares of Restricted Stock or Restricted Stock Units that is based on Performance
Measures or a level of achievement measured against Performance Measures be subject to a
performance period of less than one year. No condition that is based upon continued employment or
the passage of time shall provide for vesting or settlement in full of Restricted Stock or
Restricted Stock Units over a period of less than three years from the date the Award is made,
other than as a result of or upon the death, Disability or Retirement of the Participant or a
Change in Control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.4 Termination of Employment or Directorship Status. </B>Unless the Committee otherwise consents
or permits (before or after the grant or Restricted Stock or Restricted Stock Units) or unless the
restricted stock or restricted stock unit agreement or grant provides otherwise:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(a)&nbsp;General. </B>Except as set forth in <I>Section&nbsp;7.</I><I>4(b)</I> below, if a Participant ceases to
be a Director or Employee during the Restricted Period, the Participant shall have no
further right to retain or receive any Restricted Stock or Restricted Stock Units and all
Restricted Stock and Restricted Stock Units still subject to restrictions at the date of
such termination shall automatically be forfeited and returned to the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b)&nbsp;Death, Retirement or Disability. </B>If (i)&nbsp;a Participant&#146;s employment or
directorship with the Company is terminated because of death, Disability or (in the case of
Employees only) Retirement during the Restricted Period, or (ii)&nbsp;the Company terminates a
Participant&#146;s employment other than for Cause, then all restrictions remaining on any or
all shares of Restricted Stock and Restricted Stock Units shall terminate automatically
with respect to that respective number of such shares or Restricted Stock Units (rounded to
the nearest whole number) equal to the respective total number of such shares or Restricted
Stock Units granted to such Participant multiplied by the number of full months that have
elapsed since the date of grant divided by the total number of full months in the
respective Restricted Period. All remaining shares of Restricted Stock and Restricted Stock
Units shall be forfeited and returned to the Company. The Committee may, in its sole
discretion, waive the restrictions remaining on and forfeiture of any or all such remaining
shares of Restricted Stock and Restricted Stock Units either before or after the death,
Disability or Retirement of the Participant. Any termination of a Participant because of
Disability shall be deemed a termination by the Participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.5 Restrictions on Transferability.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(a)&nbsp;General. </B>Unless the Committee otherwise consents or permits or unless the terms
of the restricted stock or restricted stock unit agreement or grant provide otherwise: (i)
neither shares of Restricted Stock nor Restricted Stock Units may be sold, exchanged,
transferred, pledged, assigned or otherwise alienated or hypothecated during the Restricted
Period except by will or the laws of descent and distribution; and (ii)&nbsp;all rights with
respect to Restricted Stock and Restricted Stock Units granted to a Participant under the
Plan shall be exercisable during the Participant&#146;s lifetime only by such Participant or his
or her guardian or legal representative.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b)&nbsp;Other Restrictions. </B>The Committee may impose other restrictions on any shares of
Common Stock acquired pursuant to an award of Restricted Stock or issuable pursuant to
Restricted Stock Unit awards under the Plan as the Committee considers advisable,
including, without limitation, holding periods or further transfer restrictions, forfeiture
or &#147;claw-back&#148; provisions, and restrictions under applicable federal or state securities
laws.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.6 Legending of Restricted Stock. </B>In addition to any other legend that may be set forth on a
Participant&#146;s share certificate, any certificates evidencing shares of Restricted Stock awarded
pursuant to the Plan shall bear the following legend:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The shares represented by this certificate were issued subject to certain
restrictions under the Mercantile Bank Corporation Stock Incentive Plan of 2006
(the &#147;Plan&#148;). This certificate is held subject to the terms and conditions
contained in a restricted stock agreement that includes a prohibition against the
sale or transfer of the stock represented by this certificate except in compliance
with that agreement and that provides for forfeiture upon certain events. Copies
of the Plan and the restricted stock agreement are on file in the office of the
Secretary of the Company.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Committee may require that certificates representing shares of Restricted Stock be retained and
held in escrow by a designated employee or agent of the Company or any Subsidiary until any
restrictions applicable to shares of Restricted Stock so retained have been satisfied or lapsed.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.7 Rights as a Shareholder. </B>A Participant shall have all dividend, liquidation and other
rights with respect to Restricted Stock held of record by such Participant as if the Participant
held unrestricted Common Stock; <I>provided, </I>that the unvested portion of any award of Restricted
Stock shall be subject to any restrictions on transferability or risks of forfeiture imposed
pursuant to this <I>Section&nbsp;7 </I>and the terms and conditions set forth in the Participant&#146;s restricted
stock agreement. Unless the Committee otherwise determines or unless the terms of the applicable
restricted stock unit agreement or grant provide otherwise, a Participant shall have all dividend
and liquidation rights with respect to shares of Common
Stock subject to awards of Restricted Stock Units held by such Participant as if the
Participant held unrestricted Common Stock. Unless the Committee determines otherwise or unless
the terms of the applicable restricted stock or restricted stock unit agreement or grant provide
otherwise, any noncash dividends or distributions paid with respect to shares of unvested
Restricted Stock and shares of Common Stock subject to unvested Restricted Stock Units shall be
subject to the same restrictions and vesting schedule as the shares to which such dividends or
distributions relate. Any dividend payment with respect to Restricted Stock or Common Stock
subject to awards of Restricted Stock Units shall be made no later than the end of the calendar
year in which the dividends are paid to shareholders, or, if later, the 15th day of the third month
following the date the dividends are paid to shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.8 Voting Rights. </B>Unless otherwise determined by the Committee, Participants holding shares
of Restricted Stock granted hereunder may exercise full voting rights with respect to those shares
during the Restricted Period. Participants shall have no voting rights with respect to shares of
Common Stock underlying Restricted Stock Units unless and until such shares are issued and
outstanding shares on the Company&#146;s stock ledger.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 8</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Stock-Based Awards</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.1 Grant. </B>Subject to the limitations set forth in <I>Sections&nbsp;4.1 </I>and <I>4.2 </I>of the Plan, in
addition to any Stock Options, Stock Appreciation Rights, Restricted Stock, or Restricted Stock
Units that a Participant may be granted under the Plan, a Participant may be granted one or more
other types of awards based on or related to shares of Common Stock (including the grant of Stock
Awards). Such awards shall be subject to such terms and conditions, consistent with the other
provisions of the Plan, as may be determined by the Committee in its sole discretion, but in no
case shall the Committee provide for any deferral of compensation after such conditions and terms
are satisfied. Notwithstanding the previous sentence, Stock Awards shall be settled no later than
the 15th day of the third month after the awards vest. Such awards shall be expressed in terms of
shares of Common Stock or denominated in units of Common Stock. For purposes of determining the
number of shares available under the Plan, each such unit shall count as the number of shares of
Common Stock to which it relates.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.2 Rights as a Shareholder.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(a)&nbsp;Stock Awards. </B>A Participant shall have all voting, dividend, liquidation and
other rights with respect to shares of Common Stock issued to the Participant as a Stock
Award under this <I>Section&nbsp;8 </I>upon the Participant becoming the holder of record of the Common
Stock granted pursuant to such Stock Award; <I>provided</I>, that the Committee may impose such
restrictions on the assignment or transfer of Common Stock awarded pursuant to a Stock
Award as it considers appropriate. Any dividend payment with respect to a Stock Award
shall be made no later than the end of the calendar year in which the dividends are paid to
shareholders, or, if later, the 15th day of the third month following the date the
dividends are paid to shareholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b)&nbsp;General. </B>With respect to shares of Common Stock subject to awards granted under
the Plan other than Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted
Stock Units and Stock Awards, a Participant shall have such rights as determined by the
Committee and set forth in the respective award agreements; and the Committee may impose
such restrictions on the assignment or transfer of Common Stock awarded pursuant to such
awards as it considers appropriate.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 9</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Change in Control</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.1 Acceleration of Vesting. </B>If a Change in Control of the Company occurs, then, unless the
Committee or the Board otherwise determines and expressly states in the agreements governing one or
more Incentive Awards, without action by the Committee or the Board: (a)&nbsp;all outstanding Stock
Options and Stock Appreciation Rights shall become vested and exercisable in full immediately prior
to the effective time of a Change in Control and shall remain exercisable during the remaining
terms thereof,
regardless of whether the Participants to whom such Stock Options and Stock Appreciation
Rights have been granted remain in the employ or service of the Company or any Subsidiary; and (b)
all other outstanding Incentive Awards shall become immediately fully vested and exercisable and
nonforfeitable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.2 Cash Payment for Stock Options and Stock Appreciation Rights. </B>If a Change in Control of
the Company occurs, then the Committee, in its sole discretion and without the consent of any
Participant affected thereby, may determine that some or all Participants holding outstanding Stock
Options and/or Stock Appreciation Rights shall receive, with respect to and in lieu of some or all
of the shares of Common Stock subject to such Stock Options and/or Stock Appreciation Rights, as of
the effective date of any such Change in Control of the Company, cash in an amount equal to the
excess of the greater of (a)&nbsp;the highest sales price of the shares on Nasdaq on the date
immediately prior to the effective date of such Change in Control of the Company or (b)&nbsp;the highest
price per share actually paid in connection with any Change in Control of the Company, over the
exercise price per share of such Stock Options and/or the base price per share of such Stock
Appreciation Rights. Upon a Participant&#146;s receipt of such amount with respect to some or all of
his or her Stock Options and/or Stock Appreciation Rights, the respective Stock Options and/or
Stock Appreciation Rights shall be cancelled and may no longer be exercised by such Participant.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 10</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Performance Measures</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.1 Performance Measures. </B>Unless and until the Committee proposes for shareholder vote and
the shareholders approve a change in the general Performance Measures set forth in this <I>Section&nbsp;10</I>,
the performance goals upon which the payment or vesting of an Incentive Award to a Covered Employee
that is intended to qualify as Performance-Based Compensation may be based shall be limited to the
following Performance Measures:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Net income (before or after taxes, interest, depreciation, and/or
amortization);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Net income per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Return on equity;
</TD>
</TR>
</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Cash earnings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Cash earnings per share (reflecting dilution of the Common Stock as the
Committee deems appropriate and, if the Committee so determines, net of or including
dividends);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Cash earnings return on equity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Operating income;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(h)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Operating income per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Operating income return on equity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(j)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Return on assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(k)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Cash flow;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(l)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Cash flow return on capital;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(m)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Return on capital;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(n)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Productivity ratios;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(o)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Share price (including without limitation growth measures, total shareholder
return or comparison to indices);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(p)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Expense or cost levels;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(q)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Margins;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(r)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Operating efficiency;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(s)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Efficiency ratio;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(t)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Customer satisfaction, satisfaction based on specified objective goals or a
Company-sponsored customer survey;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(u)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Employee satisfaction, satisfaction based on specified objective goals or a
Company-sponsored employee survey;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(v)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Economic value added measurements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(w)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Market share or market penetration with respect to specific designated
products or services, product or service groups and/or specific geographic areas;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(x)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reduction of losses, loss ratios, expense ratios or fixed costs;<BR></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(y)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Employee turnover; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(z)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Specified objective social goals.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">One or more Performance Measures may be used to measure the performance of one or more of the
Company, its Subsidiaries, its Affiliates or any combination of the foregoing, compared to
pre-determined levels, as the Committee may deem appropriate, or compared to the performance of a
pre-established peer group, or published or special index that the Committee, in its sole
discretion, deems appropriate. The Committee also has the authority to provide for accelerated
vesting of any Incentive Award based on the achievement of performance goals pursuant to the
Performance Measures specified in this <I>Section&nbsp;10</I>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.2 Evaluation of Performance. </B>The Committee may provide in any such Incentive Award that any
evaluation of Performance may include or exclude any of the following events or their effects that
occurs during a Performance Period: (a)&nbsp;asset write-downs, (b)&nbsp;litigation or claim judgments or
settlements, (c)&nbsp;changes in tax laws, accounting principles, or other laws or provisions affecting
reported results, (d)&nbsp;any reorganization and restructuring programs, (e)&nbsp;extraordinary nonrecurring
items as described in Accounting Principles Board Opinion No.&nbsp;30 and/or in management&#146;s discussion
and analysis of financial condition and results of operations appearing in the Company&#146;s annual
report to shareholders for the applicable fiscal year, (f)&nbsp;acquisitions, mergers, divestitures or
accounting changes, (g)&nbsp;amortization of goodwill or other intangible assets, (h)&nbsp;discontinued
operations, and (i)&nbsp;other special charges or extraordinary items. To the extent such inclusions or
exclusions affect Incentive Awards to Covered Employees, they shall be prescribed in a form that
meets the requirements of Section 162(m) of the Code for deductibility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.3 Committee Discretion. </B>In the event that applicable tax laws, securities laws, or both,
change to permit Committee discretion to alter the governing Performance Measures without obtaining
shareholder approval of such changes, the Committee shall have sole discretion to make such changes
without obtaining shareholder approval. In addition, in the event that the Committee determines
that it is advisable to grant Incentive Awards that shall not qualify as Performance-Based
Compensation, the Committee may make such grants without satisfying the requirements of Section
162(m) of the Code and may base vesting on Performance Measures other than those set forth in
<I>Section&nbsp;10.1</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.4 Adjustment of Performance-Based Compensation. </B>Incentive Awards that are designed to
qualify as Performance-Based Compensation, and that are held by Covered Employees, may not be
increased or adjusted upward. The Committee shall retain the discretion to decrease or adjust such
Incentive Awards downward, and such Incentive Awards may be forfeited in whole or in part.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.5 Performance-Based Compensation Conditioned on Performance. </B>Payment of Performance-Based
Compensation to a Participant for a Performance Period under this Plan shall be entirely contingent
upon achievement of the performance goals established by the Committee pursuant to this <I>Section&nbsp;10</I>,
the satisfaction of which must be substantially uncertain when established by the Committee for the
Performance Period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.6 Time of Determination of Performance Goals by Committee. </B>All performance goals to be
made by the Committee for a Performance Period pursuant to this <I>Section&nbsp;10 </I>shall be established in
writing by the Committee during the first 90&nbsp;days of such Performance Period and before 25% of the
Performance Period has elapsed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.7 </B><B>Section 162(m)</B><B> Purpose. </B>It is intended that the Plan may provide performance-based
compensation under Section 162(m) of the Code, and the Plan shall be interpreted, administered and
amended if necessary to achieve that purpose.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.8 Objective Standards. </B>Performance-Based Compensation shall be based solely upon objective
criteria, consistent with this <I>Section&nbsp;10</I>, from which an independent third party with knowledge of
the facts could determine whether the performance goal or range of goals is met and from that
determination could calculate the Performance-Based Compensation to be paid. Although the
Committee has authority to exercise reasonable discretion to interpret this Plan and the criteria
it shall specify pursuant to this <I>Section&nbsp;10 </I>of the Plan, it may not amend or waive such criteria
after the 90th day of the respective Performance Period. The Committee shall have no authority or
discretion to increase any Performance-Based Compensation or to construct, modify or apply the
measurement of a Participant&#146;s Performance in a manner that will directly or indirectly increase
the Performance-Based Compensation for the Participant for any Performance Period above the amount
determined by the applicable objective standards established within the time period set forth in
<I>Section&nbsp;10.6</I>.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Section&nbsp;11</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>General Provisions</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.1 No Rights to Incentive Awards. </B>No Participant or other person shall have any claim to be
granted any Incentive Award under the Plan and there is no obligation of uniformity of treatment of
Participants or holders or beneficiaries of Incentive Awards under the Plan. The terms and
conditions of Incentive Awards of the same type and the determination of the Committee to grant a
waiver or modification of any Incentive Award and the terms and conditions thereof need not be the
same with respect to each Participant or the same Participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.2 Withholding. </B>The Company or a Subsidiary shall be entitled to: (a)&nbsp;withhold and deduct
from future wages of a Participant (or from other amounts that may be due and owing to a
Participant from the Company or a Subsidiary), or make other arrangements for the collection of,
all legally required amounts necessary to satisfy any and all federal, state, local and other
withholding and employment-related tax requirements attributable to an Incentive Award, including,
without limitation, taxes on income deemed to be recognized as a result of grant, exercise or
vesting of, or payment of dividends with respect to, an Incentive Award or a disqualifying
disposition of Common Stock received upon exercise of an incentive stock option; or (b)&nbsp;require a
Participant promptly to remit the amount of such withholding to the Company before taking any
action with respect to an Incentive Award. Unless the Committee determines otherwise, withholding
may be satisfied by withholding Common Stock to be received upon exercise or vesting of an
Incentive Award or by delivery to the Company of previously owned Common Stock. The Company may
establish such rules and procedures concerning timing of any withholding election as it deems
appropriate. In addition, the Company may reasonably delay the issuance or delivery of shares of
Common Stock pursuant to an Incentive Award as it determines appropriate to address tax withholding
and other administrative matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.3 Compliance with Laws; Listing and Registration of Shares. </B>All Incentive Awards granted
under the Plan (and all issuances of Common Stock or other securities under the Plan) shall be
subject to all applicable laws, rules and regulations, and to the requirement that if at any time
the Committee shall determine, in its discretion, that the listing, registration or qualification
of the shares
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">covered thereby upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the grant of such Incentive Award or the issuance or purchase
of shares thereunder, such Incentive Award may not be exercised in whole or in part, or the
restrictions on such Incentive Award shall not lapse, unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.4 No Limit on Other Compensation Arrangements. </B>Nothing contained in the Plan shall prevent
the Company or any Subsidiary from adopting, continuing in effect or discontinuing other or
additional compensation arrangements, including the grant of Stock Options and other stock-based
and stock-related awards, and such arrangements may be either generally applicable or applicable
only in specific cases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.5 No Right to Employment. </B>The grant of an Incentive Award shall not be construed as giving
a Participant the right to be retained as an Employee or Director of the Company or any Subsidiary.
The Company or any Subsidiary may at any time dismiss a Participant from employment, free from any
liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any
written agreement with the Participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.6 No Liability of Company. </B>The Company and any Subsidiary or Affiliate which is in
existence or hereafter comes into existence shall not be liable to a Participant or any other
person as to: (a)&nbsp;the non-issuance or non-sale of Common Stock as to which the Company has been
unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company&#146;s
counsel to be necessary to the lawful issuance and sale of any shares hereunder; (b)&nbsp;any tax
consequence to any Participant or other person due to the receipt, exercise or settlement of any
Incentive Award granted hereunder; and (c)&nbsp;any provision of law or legal restriction that prohibits
or restricts the transfer of shares of Common Stock issued pursuant to any Incentive Award.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.7 Suspension of Rights under Incentive Awards. </B>The Company, by written notice to a
Participant, may suspend a Participant&#146;s and any transferee&#146;s rights under any Incentive Award for
a period
not to exceed 60&nbsp;days while the termination for Cause of that Participant&#146;s employment with
the Company and its Subsidiaries is under consideration or while the removal for Cause of the
Participant as a Director is under consideration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.8 Governing Law. </B>The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws of the State of
Michigan and applicable federal law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.9 Severability. </B>In the event any provision of the Plan shall be held illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan
and the Plan shall be construed and enforced as if the illegal or invalid provision had not been
included, unless such construction would cause the Plan to fail in its essential purposes.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 12</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Termination and Amendment</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.1 Board and Committee Actions. </B>The Board may terminate the Plan at any time or may from
time to time amend or alter the Plan or any aspect of it; <I>provided</I>, that no such amendment may be
made, without the approval of shareholders of the Company, that would (i)&nbsp;except as provided in
<I>Section&nbsp;4.3</I>, reduce the exercise price at which Stock Options, or the base price at which Stock
Appreciation Rights, may be granted below the prices provided for in <I>Sections&nbsp;5.3 </I>and <I>6.1</I>,
respectively, (ii)&nbsp;except as provided in <I>Section&nbsp;4.3</I>, reduce the exercise price of outstanding
Stock Options or the base price of outstanding Stock Appreciation Rights, (iii)&nbsp;increase the
individual maximum limits in <I>Section&nbsp;4.2</I>, or (iv)&nbsp;otherwise amend the Plan in any manner requiring
shareholder approval by law or under Nasdaq listing requirements or other applicable Nasdaq rules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.2 No Impairment. </B>Notwithstanding anything to the contrary in <I>Section&nbsp;12.1</I>, no such
amendment or alteration to the Plan or to any previously granted award agreement or Incentive Award
shall
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">be made which would impair the rights of the holder of the Incentive Award, without such
holder&#146;s consent; <I>provided</I>, that no such consent shall be required if the Committee determines in
its sole discretion and prior to the date of any Change in Control that such amendment or
alteration either is required or advisable in order for the Company, the Plan or the Incentive
Award to satisfy any law or regulation or to meet the requirements of or avoid adverse tax or
financial accounting consequences under any tax or accounting standard, law or regulation.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 13</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Effective Date and Duration of the Plan</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Plan shall take effect January&nbsp;19, 2006, subject to approval by the shareholders at the
2006 Annual Meeting of Shareholders or any adjournment thereof or at a Special Meeting of
Shareholders. Unless earlier terminated by the Board of Directors, no Incentive Award shall be
granted under the Plan after January&nbsp;18, 2016.
</DIV>


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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT 10.47</B></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>MERCANTILE BANK CORPORATION<BR>
EMPLOYEE STOCK PURCHASE PLAN OF 2002</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>SECTION 1<BR>
PURPOSE OF PLAN</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purpose of the Mercantile Bank Corporation Employee Stock Purchase Plan of 2002 is to
encourage Employees of the Company and the Company&#146;s Subsidiaries to promote the best interests of
the Company and to align the interests of Employees with the Company&#146;s shareholders by permitting
Eligible Employees to purchase shares of the Company&#146;s Common Stock. The Plan is not intended to
qualify as an employee stock purchase plan under Section&nbsp;423 of the Internal Revenue Code of 1986,
as amended.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 2<BR>
DEFINITIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following words have the following meanings unless a different meaning is plainly required
by the context:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.1 </B>&#147;<B>Employee</B>&#148; means an employee of the Company or one of its Subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.2 </B>&#147;<B>Board</B>&#148; means the Board of Directors of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.3 </B>&#147;<B>Committee</B>&#148; means the Compensation Committee of the Board or such other committee as the
Board may from time to time designate to administer the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.4 </B>&#147;<B>Common Stock</B>&#148; means the Company&#146;s common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.5 </B>&#147;<B>Company</B>&#148; means Mercantile Bank Corporation, a Michigan corporation, and its successors
and assigns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.6 </B>&#147;<B>Election Form</B>&#148; means a notice (in a form approved by the Committee) that an Eligible
Employee must complete to participate in the Plan and authorize payroll deductions to be made on
the Eligible Employee&#146;s behalf under the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.7 </B>&#147;<B>Eligible Employees</B>&#148; means all present and future active full-time Employees and part-time
Employees who are regularly scheduled to work 20 hours or more per week.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.8 </B>&#147;<B>Fair Market Value</B>&#148; as of any Stock Purchase Date means the average, rounded to the
nearest whole cent, of the highest and lowest sales prices of the Common Stock reported on The
Nasdaq Stock Market (or such other quotation system or stock exchange on which the Company&#146;s Common
Stock may be traded on the date in question) on such Stock Purchase Date or, if such Stock Purchase
Date is not a trading day, the most recent date on which shares of Common Stock were traded on The
Nasdaq Stock Market (or such other quotation system or stock exchange). If the Company&#146;s Common
Stock is not listed on Nasdaq or another quotation system or stock exchange on the Stock Purchase
Date in question, the Market Value shall be determined by any means deemed fair and reasonable by
the Committee, which determination shall be final and binding on all parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.9 </B>&#147;<B>Investment Sharebuilder Account</B>&#148; means the account established on behalf of a Participant
pursuant to Section&nbsp;8.2 below, in which shares of Common Stock purchased under the Plan shall be
held.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.10 </B>&#147;<B>Option Period</B>&#148; means each calendar quarter, beginning on the first day of each such
calendar quarter and ending on the last day of such calendar quarter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.11 </B>&#147;<B>Participant</B>&#148; means an Eligible Employee who has elected to participate in the Plan in
accordance with Section&nbsp;6.1 below.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.12 </B>&#147;<B>Payroll Deduction Account</B>&#148; means the account established on behalf of a Participant
pursuant to Section&nbsp;7.1 below, to which his or her payroll deductions shall be credited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.13 </B>&#147;<B>Permanent Disability</B>&#148; or &#147;<B>Disability</B>&#148; means an inability of a Participant to perform his
or her employment duties due to physical or mental disability sufficient for the Participant to
qualify for disability benefits under the general benefits policies of the Company and in effect
from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.14 </B>&#147;<B>Plan</B>&#148; means the Mercantile Bank Corporation Employee Stock Purchase Plan of 2002 as set
forth herein, as it may be amended from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.15 &#147;Purchase Price&#148; </B>means the purchase price for a share of Common Stock to be paid by a
Participant on a Stock Purchase Date, as determined under Section&nbsp;8.1 below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.16 </B>&#147;<B>Retirement</B>&#148; means the voluntary termination of all employment by a Participant such that
the Participant would qualify for retirement benefits from the Company or a Subsidiary under
applicable retirement policies in effect from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.17 </B>&#147;<B>Stock Purchase Date</B>&#148; means a date on which shares of Common Stock are purchased pursuant
to the Plan. Unless otherwise determined by the Committee, the Stock Purchase Date shall be the
last working day of each Option Period during the term of the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.18 </B>&#147;<B>Subsidiary</B>&#148; means any corporation or other entity of which 50% or more of the
outstanding voting stock or voting ownership interest is directly or indirectly owned or controlled
by the Company or by one or more Subsidiaries of the Company. The term &#147;Subsidiary&#148; includes
present and future Subsidiaries of the Company.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 3<BR>
ADMINISTRATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.1 General. </B>The Committee shall administer the Plan. The Committee may request advice or
assistance or employ such other persons as are necessary for proper administration of the Plan,
including individuals who are employees of the Company or any Subsidiary. Subject to the express
provisions of the Plan, the Committee shall have authority to interpret the Plan, to prescribe,
amend and rescind rules, regulations and procedures relating to it, to waive any requirement of the
Plan in whole or in part and on a general or case-by-case basis, and to make all other
determinations necessary or advisable in administering the Plan, all of which determinations shall
be final and binding upon all persons unless otherwise determined by the Board. The Committee shall
hold its meetings at such times and places as it considers advisable. Action may be taken by a
written instrument signed by all of the members of the Committee and any action so taken shall be
as fully effective as if it had been taken at a meeting duly called and held. The Committee shall
make such rules and regulations, if any, for the conduct of its business as it considers advisable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.2 Indemnification of Committee Members. </B>Neither any member or former member of the
Committee, nor any individual or group to whom authority or responsibility is or has been
delegated, shall be personally responsible or liable for any act or omission in connection with the
performance of powers or duties or the exercise of discretion or judgment in the administration and
implementation of the Plan. Each person who is or shall have been a member of the Committee shall
be indemnified and held harmless by the Company from and against any cost, liability or expense
imposed or incurred in connection with such person&#146;s or the Committee&#146;s taking or failing to take
any action under the Plan or the exercise of discretion or judgment in the administration and
implementation of the Plan. Each such person shall be justified in relying on information
furnished in connection with the Plan&#146;s administration by any appropriate person or persons.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 4<BR>
STOCK SUBJECT TO THE PLAN</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.1 Number of Shares of Common Stock. </B>There shall be reserved for issuance to and purchase by
Participants under the Plan an aggregate of 25,000 shares of Common Stock, subject to adjustment as
provided in Section&nbsp;4.2. Shares of Common Stock available under the Plan shall be authorized and
unissued shares or shares purchased by the Company.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.2 Adjustments. </B>In the event of a stock dividend, stock split, recapitalization, merger,
reorganization, consolidation, combination or exchange of shares of Common Stock during the term of
the Plan, the number of shares reserved and authorized to be issued under the Plan shall be
adjusted proportionately, and such other adjustment shall be made as may be considered necessary or
equitable by the Committee or the Board. In the event of any other change affecting the Common
Stock, such adjustments shall be made as may be considered equitable by the Committee or the Board
to give proper effect to such change.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 5<BR>
ELIGIBILITY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Participation in the Plan shall be open only to Eligible Employees. No option rights may be
granted under the Plan to any person who is not an Eligible Employee.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 6<BR>
PARTICIPATION AND WITHDRAWAL</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.1 Election Form; Changes to Election Form.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Participation by any Eligible Employee in the Plan shall be entirely voluntary.
Any Eligible Employee may become a Participant by completing and delivering an Election
Form to the Company. Except with respect to the initial Option Period under this Plan,
such Eligible Employee shall become a Participant as of the first day of the next Option
Period following the delivery of his or her Election Form, provided that the Election Form
has been delivered at least ten working days prior to the beginning of the first day of
that Option Period. If the Election Form has not been delivered at least ten working days
prior to the beginning of the first day of that Option Period, then such Eligible Employee
shall become a Participant as of the first day of the second succeeding Option Period. With
respect to the initial Option Period under this Plan, such Eligible Employee shall become a
Participant as of the first pay date that is at least ten working days after the Company
receives the Election Form. The Election Form will authorize specified regular payroll
deductions (within the limits specified in Section&nbsp;7.2 below) from the Participant&#146;s
periodic compensation during the time he or she is a Participant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Payroll deductions shall be made for each Participant in accordance with the
Election Form and shall continue until the Participant&#146;s participation terminates, the
Election Form is modified or the Plan is terminated. A Participant may increase or
decrease his or her payroll deduction (within the limits specified in Section&nbsp;7.2 below) by
delivering a new Election Form to the Company. The Company or the applicable Subsidiary
shall deduct the modified amount from the Participant&#146;s payroll beginning with the first
pay date to occur on or after ten working days after the new Election Form is properly
delivered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.2 Withdrawal. </B>A Participant may elect at any time to terminate his or her participation in
the Plan by written notice delivered to the Company no later than ten working days before a pay
date, or by such other time as the Committee may from time to time determine. Upon any termination
by a Participant: (a)&nbsp;the Participant shall cease to be a Participant; (b)&nbsp;his or her Election Form
shall be revoked insofar as subsequent payroll deductions are concerned; (c)&nbsp;the amount in the
Participant&#146;s Payroll Deduction Account, as well as any unauthorized payroll deductions made after
such revocation, shall be promptly refunded to the Participant; and (d)&nbsp;a certificate for the full
shares of Common Stock credited to the Participant&#146;s Investment Sharebuilder Account shall be
promptly forwarded to the Participant. An Eligible Employee who has terminated participation in
the Plan shall not be eligible for reinstatement as a Participant for a period of six months after
such termination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as provided in Section&nbsp;9 below, if a Participant ceases to be an Eligible Employee, (a)
no further payroll deductions shall be made on his or her behalf (b)&nbsp;the accumulated balance in his
or her Payroll Deduction Account shall promptly be returned to the Participant and (c)&nbsp;a
certificate for the full shares of Common Stock credited to the Participant&#146;s Investment
Sharebuilder Account shall promptly be forwarded to the Participant.
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 7<BR>
PAYROLL DEDUCTIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.1 Payroll Deduction Account. </B>The Company and/or its Subsidiaries will maintain a Payroll
Deduction Account for each Participant. Authorized payroll deductions shall begin with the first
pay date to occur on or after the first day of the first Option Period with respect to which a
Participant has elected (in accordance with Section&nbsp;6.1) to participate in the Plan. Payments made
by Participants through payroll deductions shall be credited to each Participant&#146;s Payroll
Deduction Account. No amounts other than payroll deductions authorized under the Plan may be
credited to a Participant&#146;s Payroll Deduction Account, unless the Committee otherwise consents in
writing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.2 Limits on Payroll Deductions. </B>The amount of the payroll deduction specified by a
Participant in his or her Election Form shall not be less than $25 or more than $200 for each pay
period or such other amount as the Committee may determine in its sole discretion from time to
time. A Participant may only take payroll deductions from his or her base salary and not from a
Participant&#146;s bonuses, incentive pay or commissions.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 8<BR>
PURCHASE AND SALE OF COMMON STOCK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.1 Purchase Price. </B>The Purchase Price for each share of Common Stock purchased on a Stock
Purchase Date shall be the Fair Market Value of the Common Stock as of that Stock Purchase Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.2 Method of Purchase.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Except as otherwise provided herein, each Participant having funds in his or her
Payroll Deduction Account on a Stock Purchase Date shall be deemed, without any further
action, to have been granted and to have exercised his or her option to purchase the number
of whole shares of Common Stock which the funds in his or her Payroll Deduction Account
could purchase on the Stock Purchase Date. Options that are not exercised automatically
shall expire immediately. No fractional shares shall be issued or purchased under the
Plan. Funds not used to purchase whole shares shall remain in the Participant&#146;s Payroll
Deduction Account for future purchases. If the number of available shares on a Stock
Purchase Date is not sufficient to exhaust all Payroll Deduction Accounts, the available
shares shall be allocated in proportion to the funds available in each Payroll Deduction
Account and the Plan shall thereafter terminate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) All whole shares purchased shall be maintained in separate Investment Sharebuilder
Accounts for Participants. Unless the Participant otherwise directs, any cash dividends
paid with respect to the whole shares in a Participant&#146;s Investment Sharebuilder Account
shall be, in the discretion of the Committee, either distributed to the Participant or
applied to the Participant&#146;s Payroll Deduction Account for the purchase of whole shares,
and shares so purchased shall be added to the shares held for a Participant in his or her
Investment Sharebuilder Account. Any non-cash dividends paid with respect to the whole
shares in a Participant&#146;s Investment Sharebuilder Account shall be added to the shares held
for a Participant in his or her Investment Sharebuilder Account. Participants will be
notified not less than annually as to the amount and status of their Payroll Deduction
Accounts and Investment Sharebuilder Accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.3 Title of Accounts. </B>Each Investment Sharebuilder Account may be in the name of the
Participant or, if so indicated on the Election Form, in his or her name jointly or as tenants in
common with a member of the Participant&#146;s family, with right of survivorship. With the Committee&#146;s
consent, a Participant may be permitted to (a)&nbsp;designate a beneficiary to receive the Common Stock
held in the Participant&#146;s Investment Sharebuilder Account upon death or (b)&nbsp;transfer the Common
Stock held in the Investment Sharebuilder Account to a revocable trust for the benefit of the
Participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.4 Rights as a Shareholder. </B>After a Participant&#146;s Payroll Deduction Account has been charged
with the amount of the Purchase Price, the Participant shall have all of the rights and privileges
of a shareholder of the Company with respect to whole shares purchased under the Plan and held in
the Investment Sharebuilder Account, whether or not certificates representing the shares shall have
been issued. In addition to the provisions specified in the Plan relating to termination of a
Participant&#146;s participation in the Plan, a Participant may withdraw the shares in his or her
Investment Sharebuilder
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Account at regular intervals established by the Committee, which shall be
at least once per year. A Participant may withdraw shares held in his or her Investment
Sharebuilder Account by providing written notice to Mercantile&#146;s Chief Financial Officer or his or
her designee. A Participant&#146;s written notice must provide the number of shares a Participant intends to withdraw. Upon receiving a
Participant&#146;s written notice, Mercantile will deliver the share certificates, titled as indicated
in the Election Form, to the Participant within ten days.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.5 Sale of Shares. </B>Mercantile will not sell shares held in an Investment Sharebuilder
Account on behalf of a Participant. A Participant wishing to sell his or her shares must first
withdraw the shares as provided in Section&nbsp;8.4 above.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 9<BR>
RIGHTS ON DEATH, RETIREMENT OR PERMANENT DISABILITY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.1 Death. </B>If a Participant dies during an Option Period, no further contributions on behalf
of the deceased Participant shall be made. The executor or administrator of the deceased
Participant&#146;s estate may elect to withdraw the balance in the Participant&#146;s Payroll Deduction
Account by notifying the Company in writing at least ten working days before the Stock Purchase
Date in respect of such Option Period. If no election to withdraw has been made, the balance
accumulated in the deceased Participant&#146;s Payroll Deduction Account shall be used to purchase
shares of Common Stock on the next Stock Purchase Date in accordance with Section&nbsp;8 of the Plan.
The Company shall deliver a written statement of the number of whole shares that such deceased
Participant purchased under the Plan to his or her executor or administrator upon request. The
Company shall deliver any amounts remaining in the deceased Participant&#146;s Payroll Deduction Account
after the last applicable Stock Purchase Date to his or her executor or administrator.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.2 Retirement or Permanent Disability. </B>If, during an Option Period, a Participant (a)
Retires or (b)&nbsp;incurs a Permanent Disability, no further contributions on behalf of the Retired or
Disabled Participant shall be made. A Retired or Disabled Participant may elect to withdraw the
balance in his or her Payroll Deduction Account by notifying the Company in writing at least ten
working days before the Stock Purchase Date in respect of such Option Period. If no election to
withdraw has been made, the balance accumulated in the Retired or Disabled Participant&#146;s Payroll
Deduction Account shall be used to purchase shares of Common Stock on the next Stock Purchase Date
in accordance with Section&nbsp;8 of the Plan. The Company shall deliver a written statement of the
number of whole shares that such Retired or Disabled Participant purchased under the Plan to such
Retired or Disabled Participant&#146;s upon request. The Company shall deliver any amounts remaining in
the Retired or Disabled Participant&#146;s Payroll Deduction Account after the last applicable Stock
Purchase Date to such Retired or Disabled Participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a Retired or Disabled Participant dies during the Option Period of such Participant&#146;s
Retirement or Permanent Disability and such Participant did not notify the Company of his or her
desire to withdraw the balance in his or her Payroll Deduction Account, the executor or
administrator of such Participant&#146;s estate or other legal title holder shall have all the rights
provided pursuant to Section&nbsp;9.1.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 10<BR>
GENERAL PROVISIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.1 Rights Not Transferable. </B>Rights under the Plan are not transferable by a Participant
other than by will or the laws of descent and distribution, and are exercisable during his or her
lifetime only by the Participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.2 Amendment or Suspension of the Plan. </B>The Committee or the Board may at any time, and
from time to time, amend the Plan in any respect or suspend the operation of the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.3 Termination of the Plan. </B>The Plan and all rights of Employees hereunder shall terminate
at the earliest of: (a)&nbsp;when all shares of Common Stock reserved under the Plan have been
purchased; or (b)&nbsp;at any time, at the discretion of the Committee or the Board. Notice of
termination shall be given to all Participants, but any failure to give notice shall not impair the
termination. Upon termination of the Plan, all amounts in Payroll Deduction Accounts of
Participants and all Common Stock held in Investment Sharebuilder Accounts of Participants shall
promptly be returned to such Participants.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.4 Governing Law; Compliance with Law. </B>The Plan shall be construed in accordance the laws
of the state of Michigan. The Company&#146;s obligation to sell and deliver shares of Common Stock
hereunder shall be subject to all applicable federal and state laws, rules and regulations and to
such approvals by any regulatory or governmental agency as may, in the opinion of counsel for the
Company, be required. The Company may make such provisions as it may deem appropriate for the withholding
of any taxes or payment of any taxes which it determines it may be required to withhold or pay in
connection with a Participant&#146;s participation in the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.5 Not an Employment Contract. </B>The Plan shall not be deemed to constitute a contract of
employment between the Company or any Subsidiary and any Eligible Employee or Participant or to be
consideration or inducement for the employment of any Eligible Employee or Participant. The Plan
shall not be deemed to give any Participant or Eligible Employee the right to be retained as an
Employee or in any other service of the Company or any Subsidiary, or to interfere with the right
of the Company or any Subsidiary to discharge any Participant or Eligible Employee at any time
regardless of the effect that such discharge shall have upon such person as a participant in the
Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.6 Effective Dates. </B>The first Option Period under the Plan shall commence on October&nbsp;1,
2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.7 Investment Intent. </B>The Committee may require a Participant to confirm that he or she is
purchasing with investment intent and not with a view to resale or other distribution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.8 Severability. </B>In the event any provision of the Plan shall be held illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan
and the Plan shall be construed and enforced as if the illegal or invalid provision had not been
included.
</DIV>


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<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>k47547exv21.htm
<DESCRIPTION>EX-21
<TEXT>
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<TITLE>EX-21</TITLE>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT 21</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">SUBSIDIARIES OF MERCANTILE BANK CORPORATION

</DIV>

<DIV align="left" style="margin-left: 5%; text-indent: -5%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Mercantile Bank of Michigan, a Michigan banking corporation<BR>
Wholly-owned bank subsidiary of Mercantile Bank Corporation</DIV>


<DIV align="left" style="margin-left: 5%; text-indent: -5%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Mercantile Bank Capital Trust I<BR>
A Delaware business trust subsidiary of Mercantile Bank Corporation</DIV>


<DIV align="left" style="margin-left: 5%; text-indent: -5%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Mercantile Bank Mortgage Company, LLC, a Michigan limited liability company<BR>
99% owned by Mercantile Bank of Michigan and 1% owned by Mercantile Insurance Center, Inc.</DIV>


<DIV align="left" style="margin-left: 5%; text-indent: -5%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Mercantile Insurance Center, Inc, a Michigan business corporation<BR>
Wholly-owned subsidiary of Mercantile Bank of Michigan</DIV>


<DIV align="left" style="margin-left: 5%; text-indent: -5%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Mercantile Bank Real Estate Co., LLC, a Michigan limited liability company<BR>
99% owned by Mercantile Bank of Michigan and 1% owned by Mercantile Insurance Center, Inc.</DIV>


<DIV align="left" style="margin-left: 5%; text-indent: -5%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">West Lake Associates, LLC, a Michigan limited liability company<BR>
100% owned by Mercantile Bank of Michigan</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All six of the subsidiaries named above with the exception of Mercantile Bank Capital Trust I were
organized under the laws of the State of Michigan. Mercantile Bank Capital Trust I was organized
under the laws of the State of Delaware.
</DIV>


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</DIV>

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<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>8
<FILENAME>k47547exv23w1.htm
<DESCRIPTION>EX-23.1
<TEXT>
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<TITLE>EX-23.1</TITLE>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT 23.1</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We hereby consent to the incorporation by reference in the Registration Statements on Form S-3
(Registration Nos. 333-59154, 333-103376, 333-0108929, and 333-107814) and Form S-8 (Registration
Nos. 333-52620, 333-91434, 333-99853 333-103242, 333-117763, 333-119767, 333-138328 and 333-152254)
of Mercantile Bank Corporation of our reports dated March&nbsp;11, 2009 relating to the consolidated
financial statements and the effectiveness of Mercantile Bank Corporation&#146;s internal control over
financial reporting, which appear in this Annual Report on Form 10-K.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
</TR><TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ BDO Seidman, LLP
&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">BDO Seidman, LLP&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">Grand Rapids, Michigan<BR>March 11, 2009&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>9
<FILENAME>k47547exv23w2.htm
<DESCRIPTION>EX-23.2
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-23.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT 23.2</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We hereby consent to the incorporation by reference in the Registration Statements of Mercantile
Bank Corporation on Form S-8 (Registration Nos. 333-52620, 333-91434, 333-99853, 333-103242,
333-117763, 333-119767, 333-138328 and 333-152254) and Form S-3 (Registration Nos. 333-59154,
333-103376, 333-108929, and 333-107814) of our report dated February&nbsp;20, 2007 relating to the
consolidated financial statements of Mercantile Bank Corporation for
the year ended December&nbsp;31, 2006 which report is included in the 2008 Annual Report on
Form 10-K of Mercantile Bank Corporation for the year ended December&nbsp;31, 2008.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Crowe Horwath LLP
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Crowe Horwath LLP&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Grand Rapids, Michigan<BR>
March&nbsp;11, 2009
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>10
<FILENAME>k47547exv31.htm
<DESCRIPTION>EX-31
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-31</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT 31</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">RULE 13a-14(a) CERTIFICATIONS

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Michael H. Price, Chairman, President and Chief Executive Officer of Mercantile Bank
Corporation, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this report on Form 10-K of Mercantile Bank Corporation (the &#147;registrant&#148;);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is
being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter (the
registrant&#146;s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant&#146;s internal control
over financial reporting; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the
audit committee of the registrant&#146;s board of directors (or persons performing the equivalent
functions):</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrant&#146;s ability to record, process, summarize and report financial information;
and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant&#146;s internal control over financial reporting.</TD>
</TR>

</TABLE>
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: March&nbsp;11, 2009
&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">      /s/ Michael H. Price
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Michael H. Price&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chairman of the Board, President and Chief


Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Charles E. Christmas, Senior Vice President, Chief Financial Officer and Treasurer of Mercantile
Bank Corporation, certify that:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I have reviewed this report on Form&nbsp;10-K of Mercantile Bank Corporation (the &#147;registrant&#148;);
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is
being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter (the
registrant&#146;s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant&#146;s internal control
over financial reporting; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the
audit committee of the registrant&#146;s board of directors (or persons performing the equivalent
functions):</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrant&#146;s ability to record, process, summarize and report financial information;
and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant&#146;s internal control over financial reporting.</TD>
</TR>

</TABLE>
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: March&nbsp;11, 2009&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Charles E. Christmas
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Charles E. Christmas.&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left" nowrap>Senior Vice President, Chief Financial Officer<BR>
and Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>11
<FILENAME>k47547exv32w1.htm
<DESCRIPTION>EX-32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-32.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT 32.1</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This certification is provided pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002, 18
U.S.C. &#167; 1350, and accompanies the annual report on Form 10-K for the year ended December&nbsp;31, 2008
(the &#147;Form&nbsp;10-K&#148;) of Mercantile Bank Corporation (the &#147;Issuer&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I, Michael H. Price, Chairman, President and Chief Executive Officer of the Issuer, certify
that to my knowledge:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Form 10-K fully complies with the requirements of Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the information contained in the Form 10-K fairly presents, in all material
respects, the financial condition and results of operations of the Issuer.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dated: March&nbsp;11, 2009
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">     /s/ Michael H. Price
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Michael H. Price.&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chairman of the Board, President and Chief<BR>
Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

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<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>12
<FILENAME>k47547exv32w2.htm
<DESCRIPTION>EX-32.2
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-32.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT 32.2</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This certification is provided pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002, 18
U.S.C. &#167; 1350, and accompanies the annual report on Form 10-K for the year ended December&nbsp;31, 2008
(the &#147;Form&nbsp;10-K&#148;) of Mercantile Bank Corporation (the &#147;Issuer&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I, Charles E. Christmas, Senior Vice President, Chief Financial Officer and Treasurer of the
Issuer, certify that to my knowledge:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Form 10-K fully complies with the requirements of Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the information contained in the Form 10-K fairly presents, in all material
respects, the financial condition and results of operations of the Issuer.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dated: March&nbsp;11, 2009
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Charles E. Christmas
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Charles E. Christmas</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left" nowrap>Senior Vice President, Chief Financial Officer<BR>
and Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>



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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
